Foxx Corporation acquired all of Greenburg Company\'s outstanding stock on Janua

Question

Foxx Corporation acquired all of Greenburg Company's outstanding stock on January 1, 2016, for $816,000 cash. Greenburg's accounting records showed net assets on that date of $587,000, although equipment with a 10-year life was undervalued on the records by $183,000. Any recognized goodwill is considered to have an indefinite life Greenburg reports net income in 2016 of $91,000 and $108,000 in 2017. The subsidiary declared dividends of $20,000 in each of these two years Account balances for the year ending December 31, 2018, follow. Credit balances are indicated by parentheses Foxx Greenburg (912,000) 228,000 435,000 $ (1,196,000) Revenues Cost of goods sold Depreciation expense Investment income 149,500 476,000 (20,000 (590,500) $ (1,108,000) (590,500) s (249,000) $ (344,000) (249,000) Net income Retained earnings, 1/1/18 Net income Dividends declared 120,000 20,000 Retained earnings, 12/31/18 $ (1,578,500) s (573,000) $363,000 816,000 1,064,000 882,000 728,000 $ 3,853,000 $ 143,000 Current assets Investment in subsidiary Equipment (net) Buildings (net) Land 746,000 528,000 118,000 1,535,000 Total assets Liabilities Common stock Retained earnings $ (1,374,500) (900,000) $ (662,000) (300,000) (1,57,500) (573,000) $ (1,535,000) Total liabilities and equity $ (3,853,000)

Explanation / Answer

Solution :-

(d).Determine parent's investment income for 2018 under partial equity method and equity method:-

= 1,08,000 - 91,000

= $17,000

(e). What would be Foxx's balance for retained earnings as of ianuary 1,2018,if each of the use?

= 91,000 - 20,000

= $71,000

= 1,08,000 - 20,000

= $88,000

= $1,100,000 + $71,000 + $88,000

= $1,259,000

= 91,000 - 20,000

= $71,000

Depreciation on excess of fair value of equipment over book value in 2016

= 183,000 / 10

= $18,300

= 1,08,000 - 20,000

= $88,000

= 183,000 / 10

= $18,300

= ( $1,100,000 + $71,000 + $88,000 )- (18,300 + 18,300)

= $1,222,400

Equity accrual $1,08,000

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