Parkovash, Incorporated, obtained $100$ percent of Salerno Company$$s common stock on January $1,2023,$ by issuing $10,700$ shares of $$10$ par value common stock. Parkovash$$s shares had a $$15$ per share fair value. On that date, Salerno reported a net book value of $$114,800.$ However, its equipment $($with a $5-$year remaining life$)$ was undervalued by $$8,800$ in the company$$s accounting records. Also, Salerno had developed computer software with an assessed value of $$36,900,$ although no value had been recorded on Salerno$$s books. The computer software had an estimated remaining useful life of $10$ years.

The following balances come from the individual accounting records of these two companies as of December $31,2023$:

Items Parkovash Salerno

Revenues $ $(660,000)$ $ $(375,000)$

Expenses $450,000207,000$

Investment income Not given $0$

Dividends declared $110,00080,000$

The following balances come from the individual accounting records of these two companies as of December $31,2024$:

Items Parkovash Salerno

Revenues $ $(831,000)$ $$(440,000)$

Expenses $477,600242,500$

Investment income Not given $0$

Dividends declared $120,00060,000$

Equipment $546,000360,000$

Required:

a$.$ What balance does Parkovash$$s Investment in Salerno account show on December $31,2024,$ when the equity method is applied?

b$.$ What is the consolidated net income for the year ending December $31,2024?$

c$-1.$ What is the consolidated equipment balance as of December $31,2024?$

c$-2.$ Would this answer be affected by the investment method applied by the parent?

d$.$ Prepare entry $*$C for the beginning of the Retained Earnings account on a December $31,2024$ by using initial value, partial equity and equity method.

Answer rating: 100% (QA)

a To determine the balance in Parkovashs Investment in Salerno account on December 31 2024 when the equity method is applied we need to consider the c... View the full answer