Assuming Gold uses the equity method to account for investments and that Gold’s (unconsolidated) balance sheet on December 31, 20X6, reflected retained earnings of $2,000,000, what amount of retained earnings should be shown in the December 31, 20X6, consolidated balance sheet of Gold and its new subsidiary, Nugget?

a. $2,000,000

b. $2,600,000

c. $2,800,000

d. $3,150,000 Nugget Company’s balance sheet on December 31, 20X6, was as follows:

On December 31, 20X6, Gold Company acquired all of Nugget’s outstanding common stock for $1,500,000 cash. On that date, the fair (market) value of Nugget’s inventories was $450,000, and the fair value of Nugget’s property, plant, and equipment was $1,000,000. The fair values of all other assets and liabilities of Nugget were equal to their book values.

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Assets Liabilities & Stockholders' Equity Cash $ 100,000 Current Liabilities $ 300,000 Accounts Receivable 200,000 Long-Term Debt 500,000 Inventories 500,000 Common Stock (par $1 per share) 100,000 Property, Plant & Equipment (net) 900,000 Additional Paid-In Capital 200,000 Retained Earnings 600,000 Total Assets $1,700,000 Total Liabilities & Stockholders' Equity $1,700,000