Working backward to consolidation relations. Laesch Company, as parent, owns shares in Lily Company. Laesch has owned

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Working backward to consolidation relations. Laesch Company, as parent, owns shares in Lily Company. Laesch has owned the shares since it formed Lily. Lily has never declared a dividend. Laesch has retained earnings from its own Operations independent of inter-corporate investments of $100,000. The consolidated balance sheet shows no goodwill and shows retained earnings of $156,000. Consider each of the following questions independently of the others:
a. If Laesch owns 80% of Lily, its consolidated subsidiary, what are the retained earnings of the subsidiary?
b. If Lily has retained earnings of $77,000, what fraction of Lily does Laesch own?
c. If Laesch had not consolidated Lily but instead had accounted for it using the equity method, how much revenue would Laesch have recognized from the investment?

Goodwill
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...
Balance Sheet
Balance sheet is a statement of the financial position of a business that list all the assets, liabilities, and owner’s equity and shareholder’s equity at a particular point of time. A balance sheet is also called as a “statement of financial...
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Financial Accounting an introduction to concepts, methods and uses

ISBN: 978-0324789003

13th Edition

Authors: Clyde P. Stickney, Roman L. Weil, Katherine Schipper, Jennifer Francis

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