Question

On January 1, 2014, Pitt Company purchased an 80% investment in Saxe Company. The acquisition cost was equal to Pitt’s equity in Saxe’s recorded net assets at that date. On January 1, 2014, Pitt and Saxe had retained earnings of $500,000 and $100,000, respectively. During 2014, Pitt had net income of $200,000, which included its equity in Saxe’s earnings, and declared dividends of $50,000. Saxe had net income of $40,000 and declared dividends of $20,000. No other intra-entity transactions between the parent and subsidiary occurred.

Required:
What should the consolidated retained earnings be on December 31, 2014?



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  • CreatedSeptember 10, 2014
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