Leh 355 Stem Cell PCBE: Beyo. Stem Cel B.. Mylab & M. ssignment 5 Help Save & Ex

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Leh 355 Stem Cell PCBE: Beyo. Stem Cel B.. Mylab & M. ssignment 5 Help Save & Exit Sub Check my wor Foxx Corporation acquired all accounting records showed net assets on that date of $555,000, although equipment with a 10-year life was undervalued on th records by $171,000. Any recognized goodwill is considered to have an indefinite life. of Greenburg Company's outstanding stock on January 1, 2016, for $776,000 cash. Greenburg's Greenburg reports net income in 2016 of $95,500 and $132.500 in 2017. The subsidiary declared dividends of $20,000 in each these two years. Account balances for the year ending December 31, 2018, follow. Credit balances are indicated by parentheses Cost of goods sold Depzeciation expense Investment income (816,000) 102,000 490,000 (840,000) 210,000 442,000 s (244,0o0) 5 (188,000) Retained earnings,1/1/18 Net incone Dividends declared (,178,000) (244,000) (332,000) (188,000) 120 00020,000 11.302,000) (500,000) $ 125,000 Retained earninge, 12/31/18 Current assets Investment in subsidiary Equipment (net) Buildings (net) $ 398,000 776,000 1.024,000 730,000 428,000 1,451,000 (1,626,000)652.000) Total assets 5 3,828,000 (900,000) (300,000) 1 of 1 Next 7 8 9

Explanation / Answer

Post E Seperately

Calculate the annual amortization of the equipment using the life span.

Annual Excess Amortization =$171000/10 =$17100

Calculate the consolidated balance for depreciation expense

Depreciation Expense =$490000+$442000+$17100=$949100

Calculate the consolidated balance for Dividend Paid

Dividends paid =$120000

Revenues =816000+840000=$1656000

Equipment =$1024000+$730000+$171000-17100*3=$1873700

Common Stock -Only the parent common stock is relevant ie $900000

Calculation of Goodwill:

Consideration Transferred =$776000

BV                                     =$(555000)

Fair Value in excess of BV=$221000

Allocation of Equipment =($171000)

Goodwill                          =$50000

b.the parent choice of an accounting method for its investment has no impact on the consolidated balances.The only impact is on the internal repporting for the parent.It must use the standrad account rules issued by GAAP to consolidate both company's accounts equally.The company has the option of using one of the three methods for its own accounts.

c.If the parent investment in the subsidairy remains at the original consideration transfered amount of $776000,then the initial value method is used.The investment balance remains at the parent financial records at the intial fair value that was assigned at the aquistion date.Also the parent company did not use or require an accrual based income measure of the subsidiary performance over the years.

d.It was determined in C that the parent company uses the initial value method.Therefore the other options that could have been used are the equity method and the partial equity method.If the partial equity method is utilized an amount of $188000 in equity accrual from income .If the equity method were used the investment account would have shown the equity accrual amount of $188000 and less amount of excess amortization of $17100.

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