Question: CORRECT ANSWER IS GIVEN, PLEASE EXPLAIN STEPS On January 1, 20X4, Plimsol Company acquired 100 percent of Shipping Corporation's voting shares, at underlying book value.
CORRECT ANSWER IS GIVEN, PLEASE EXPLAIN STEPS
On January 1, 20X4, Plimsol Company acquired 100 percent of Shipping Corporation's voting shares, at underlying book value. Plimsol uses the cost method in accounting for its investment in Shipping. Shipping's retained earnings was $75,000 on the date of acquisition. On December 31, 20X4, the trial balance data for the two companies are as follows:
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|
| Plimsol Co. |
| Shipping Corp. |
| ||||
|
| Item | Debit |
| Credit |
| Debit |
| Credit |
|
|
| Current Assets | $100,000 |
|
|
| $ 75,000 |
|
|
|
|
| Depreciable Assets (net) | 200,000 |
|
|
| 150,000 |
|
|
|
|
| Investment in Shipping Corp. | 125,000 |
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|
|
|
|
|
|
|
| Other Expenses | 60,000 |
|
|
| 45,000 |
|
|
|
|
| Depreciation Expense | 20,000 |
|
|
| 15,000 |
|
|
|
|
| Dividends Declared | 25,000 |
|
|
| 15,000 |
|
|
|
|
| Current Liabilities |
|
| $ 40,000 |
|
|
| $ 25,000 |
|
|
| Long-Term Debt |
|
| 75,000 |
|
|
| 50,000 |
|
|
| Common Stock |
|
| 100,000 |
|
|
| 50,000 |
|
|
| Retained Earnings |
|
| 150,000 |
|
|
| 75,000 |
|
|
| Sales |
|
| 150,000 |
|
|
| 100,000 |
|
|
| Dividend Income |
|
| 15,000 |
|
|
|
|
|
|
|
| $530,000 |
| $530,000 |
| $300,000 |
| $300,000 |
|
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48. Based on the information provided, what amount of retained earnings will be reported in the consolidated balance sheet prepared on December 31, 20X4?
A. $235,000
B. $210,000
C. $310,000
D. $225,000
50. Based on the information provided, what amount of total stockholder's equity will be reported in the consolidated balance sheet prepared on December 31, 20X4?
A. $190,000
B. $335,000
C. $460,000
D. $310,000
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