Global Enterprises Corporation (GE) is a manufacturing company whose principal products are microwave ovens, refrigerators, and conventional ovens. The company had a long history of selling high-quality, high-priced home appliances; however, recent reductions in the price of competitor products forced GE to consider ways to provide assistance to its customers to help them buy its products. As a consequence, GE started its own finance subsidiary, the GE Acceptance Corporation (GEAC), to assist customers in financing their purchases.

GE Corporation is also associated with three other companies. It holds an 80 percent interest in Scrub-All, a company that makes automatic dishwashers. GE purchased the interest in Scrub-All because the company’s product line complemented its own items and the products were a quality that GE would have had difficulty duplicating. Further, to ensure a steady supply of chrome parts for its appliances, GE obtained a 10 percent interest in the common stock of Acme Chrome Company. Well over 50 percent of Acme’s sales were attributed to purchases by GE and Scrub-All. Further, to compete in the low-end market for various appliances, GE formed a joint venture (Spotless Appliance) with Whirlwind Products Co. to produce low-cost appliances. The following is a summary of GE’s subsidiaries, affiliates, and equity investments:

Required
1. Why are the investments in Acme Chrome and Spotless Appliance Companies shown on the GE Corporation consolidated balance sheet while the investments in Scrub-All and GEAC are omitted?
2. What is meant by the carrying value “at equity” for the investment in Spotless Appliance 3. Company on GE’s consolidated balance sheet?
4. Why is the investment in Acme Chrome Company shown “at market”?Explain the Goodwill account on GE’s consolidated balance sheet. To what company is this account related?
5. What is meant by “noncontrolling interest” on GE’s consolidated balance sheet? To which company is this account related? Is this a liability or a shareholders’ equity account?
6. What are GE Corporation’s current ratio, total debt to equity ratio, and total debt to total asset ratio? Are these ratios correct?

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GE Acceptance Corporation. GEAC is a wholly-owned subsidiary that purchases consumer notes from its parent, GE Corporation. GEAC borrows funds from several banking institutions on a medium- and long-term basis and uses the margins between the short-term interest rates on the consumer notes and the rates on its medium- and long-term liabilities to cover its over- head costs. The parent company (GE) guarantees all of the borrowings of GEAC. Scrub-All Company. With an ownership interest of 80 percent of the common stock of Scrub- All, GE controls the strategic policies of Scrub-All Company through an interlocking board of directors. Scrub-All, like GE, sells its consumer notes to GEAC. Acme Chrome Company. To guarantee a steady supply of chrome parts, GE purchased a 10 percent interest in Acme Chrome Company. Over the years, a strong relationship had developed between GE and Acme. For example, Acme schedules the production run of its other customers around the production needs of GE and Scrub-All. Spotless Appliance Company. Both GE Corporation and Whirlwind Products Company (an otherwise unrelated company) contributed half of the funds necessary to start Spotless Appli- ance Company. Spotless Appliance Company makes low-end appliance models that are sold under the Spotless trade name or are labeled with various department store names.