When a parent company applies the initial value method or the partial equity method to an investment, worksheet adjustment must be made to the parent’s beginning Retained Earnings account (Entry *C) in every period after the year of acquisition. What is the necessity for this entry? Why is no similar entry found when the parent utilizes the equity method?
Answer to relevant QuestionsWhen should a parent consider recognizing an impairment loss for goodwill associated with a subsidiary? How should the loss be reported in the financial statements?When a parent company uses the equity method to account for an investment in a subsidiary, why do both the parent’s Net Income and Retained Earnings account balances agree with the consolidated totals?Acme Co., a consolidated enterprise, conducted an impairment review for each of its reporting units. One particular reporting unit, Martel, emerged as a candidate for possible goodwill impairment. Martel has recognized net ...Patrick Corporation acquired 100 percent of O’Brien Company’s outstanding common stock on January 1, for $550,000 in cash. O’Brien reported net assets with a carrying value of $350,000 at that time. Some of ...On January 1, Prine, Inc., acquired 100 percent of Lydia Company’s common stock for a fair value of $120,000,000 in cash and stock. Lydia’s assets and liabilities equaled their fair values except for its equipment, which ...
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