On January 2, 2013, Parker Corporation invests in the stock of Quarry Corporation. Quarry's book value is $4 million and
Quarry Corporation's financial statements for 2013 are as follows:
Prepare Parker's December 31, 2013, balance sheet and 2013 income statement under each of the following circumstances:
a. Parker's investment consists of 100,000 shares costing $15/share, and Parker classifies it as an AFS investment. The shares have a market value of $12/share on December 31, 2013.
b. Parker's investment consists of 400,000 shares costing $15/share, and Parker accounts for it using the equity method.
c. Parker acquires all of Quarry's shares for $15 million, retires the shares and merges with Quarry. Goodwill is unimpaired in 2013.
Goodwill is an important concept and terminology in accounting which means good reputation. The word goodwill is used at various places in accounting but it is recognized only at the time of a business combination. There are generally two types of...
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