Exercise 3 (LO 2) Equity method, first year, eliminations, statements. Parker Company acquires an 80% interest in Sargent Company for $300,000 in cash on January 1, 2015, when Sargent Company has the following balance sheet: Assets Liabilities and Equity Current assets . $100,000 Current liabilities . . ... . $ 50,000 Depreciable fixed assets (net) . . 200,000 Common stock ($ 10 par). 100,000 Retained earnings . . 150,000 Total assets. .. $300,000 Total liabilities and equity .. . ... $300,000 The excess of the price paid over book value is attributable to the fixed assets, which have a fair value of $250,000, and to goodwill. The fixed assets have a 10-year remaining life. Parker Company uses the simple equity method to record its investment in Sargent Company. The following trial balances of the two companies are prepared on December 31, 2015: Parker Sargent Current Assets . . 10,000 130,000 Depreciable Fixed Assets 400,000 200,000 Accumulated Depreciation (106,000) (20,000) Investment in Sargent Company 316,000 Current Liabilities . . .. (60,000) (40,000) Common Stock ($10 par) . . (300,000) (100,000) Retained Earnings, January 1, 2015. (200,000) (150,000) Sales ....... (150,000) (100,000) Expenses . . . . .. 1 10,000 75,000 Subsidiary Income. (20,000) Dividends Declared 5,000 Totals O O