Answered: Pride Star 2018 Revenues. 2018 Expenses…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Related questions

Question

Problems 7 and 8 relate to the following:

On January 1, 2016, Pride Corporation purchased 90 percent of the outstanding voting shares of Star, Inc., for $540,000 cash. The acquisition-date fair value of the noncontrolling interest was $60,000. At January 1, 2016, Star’s net assets had a total carrying amount of $420,000. Equipment (eight-year remaining life) was undervalued on Star’s financial records by $80,000. Any remaining excess fair value over book value was attributed to a customer list developed by Star (four-year remaining life), but not recorded on its books. Star recorded net income of $70,000 in 2016 and $80,000 in 2017. Each year since the acquisition, Star has declared a $20,000 dividend. At January 1, 2018, Pride’s retained earnings show a $250,000 balance.

Selected account balances for the two companies from their separate operations were as follows

Assuming that Pride, in its internal records, accounts for its investment in Star using the equity method, what amount of retained earnings would Pride report on its January 1, 2018, consolidated balance sheet?

a. $250,000

b. $286,000

c. $315,000

d. $360,000

Pride
Star
2018 Revenues.
2018 Expenses
$498,000
$285,000
195,000

Expert Solution

Trending now

This is a popular solution!

Step by step

Solved in 2 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.

Recommended textbooks for you

FINANCIAL ACCOUNTING

Accounting

ISBN:

9781259964947

Author:

Libby

Publisher:

MCG