Pueblo Corporation acquired all of Spartan Company's outstanding stock on January 1, 2018, for $1,320,000 cash....

 

 

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Pueblo Corporation acquired all of Spartan Company's outstanding stock on January 1, 2018, for $1,320,000 cash. Spartan's accounting records reflected net assets on that date of $1,034,000, although equipment with a 10-year life was undervalued on the records by $198,000. Any recognized goodwill is considered to have an indefinite life. Spartan reports net income in 2018 of $198,000 and $220,000 in 2019. The subsidiary paid dividends of $44,000 in each of these two years. Financial figures for the year ending December 31, 2020, follow. Credit balances are indicated by parentheses. Pueblo Spartan $(1,320,000) 330,000 770,000 Revenues. $(1,760,000) 220,000 660,000 (44,000) $(924,000) $(2,420,000) (924,000) 264,000 $(3,080,000) $660,000 1,320,000 Cost of goods sold Depreciation expense. Investment income.. -0- $(220,000) $(704,000) (220,000) 44,000 Net income Retained earnings 1/1/20. . Net income Dividends paid Retained earnings, 12/31/17 Current assets. Investment in subsidiary Equipment (net) Buildings (net) Land. $(880,000) $220,000 -0- 1,980,000 1,760,000 1,320,000 $7,040,000 $(1,980,000) (1,980,000) (3.080,000) $(7,040,000) 1,320,000 880,000 220,000 $2,640,000 $(1,100,000) (660,000) (880,000) $(2.640,000) Total assets Liabilities. Common stock. Retained earnings. Total liabilities and equity. Complete the following: Determine the December 31, 2020, consolidated balance for each of the following a. accounts: Depreciation Expense Dividends Paid Revenues Equipment Buildings • Goodwill Common Stock How does the parent's choice of an accounting method for its investment affect the balances computed in requirement (a)? Which method of accounting for this subsidiary is the parent actually using for internal reporting purposes? If the parent company had used a different method of accounting for this investment, how could that method have been identified? b. C. d. What would be Pueblo's balance for retained earnings as of January 1, 2020, if each of the following methods had been in use? e. Initial value method Partial equity method Equity method Pueblo Corporation acquired all of Spartan Company's outstanding stock on January 1, 2018, for $1,320,000 cash. Spartan's accounting records reflected net assets on that date of $1,034,000, although equipment with a 10-year life was undervalued on the records by $198,000. Any recognized goodwill is considered to have an indefinite life. Spartan reports net income in 2018 of $198,000 and $220,000 in 2019. The subsidiary paid dividends of $44,000 in each of these two years. Financial figures for the year ending December 31, 2020, follow. Credit balances are indicated by parentheses. Pueblo Spartan $(1,320,000) 330,000 770,000 Revenues. $(1,760,000) 220,000 660,000 (44,000) $(924,000) $(2,420,000) (924,000) 264,000 $(3,080,000) $660,000 1,320,000 Cost of goods sold Depreciation expense. Investment income.. -0- $(220,000) $(704,000) (220,000) 44,000 Net income Retained earnings 1/1/20. . Net income Dividends paid Retained earnings, 12/31/17 Current assets. Investment in subsidiary Equipment (net) Buildings (net) Land. $(880,000) $220,000 -0- 1,980,000 1,760,000 1,320,000 $7,040,000 $(1,980,000) (1,980,000) (3.080,000) $(7,040,000) 1,320,000 880,000 220,000 $2,640,000 $(1,100,000) (660,000) (880,000) $(2.640,000) Total assets Liabilities. Common stock. Retained earnings. Total liabilities and equity. Complete the following: Determine the December 31, 2020, consolidated balance for each of the following a. accounts: Depreciation Expense Dividends Paid Revenues Equipment Buildings • Goodwill Common Stock How does the parent's choice of an accounting method for its investment affect the balances computed in requirement (a)? Which method of accounting for this subsidiary is the parent actually using for internal reporting purposes? If the parent company had used a different method of accounting for this investment, how could that method have been identified? b. C. d. What would be Pueblo's balance for retained earnings as of January 1, 2020, if each of the following methods had been in use? e. Initial value method Partial equity method Equity method

Answer rating: 100% (QA)

a CONSOLIDATED BALANCE FOR EACH OF THE FOLLOWING ACCOUNTS b Parent while acounting for its Investmen... View the full answer