Foxx Corporation acquired all of Greenburg Company’s outstanding stock on January 1, 2019, for $662,000 cash. Greenburg’s accounting records showed net assets on that date of $490,000, although equipment with a 10-year remaining life was undervalued on the records by $99,500. Any recognized goodwill is considered to have an indefinite life. Greenburg reports net income in 2019 of $106,000 and $133,000 in 2020. The subsidiary declared dividends of $20,000 in each of these two years. Account balances for the year ending December 31, 2021, follow. Credit balances are indicated by parentheses. Foxx Greenburg Revenues $ (912,000 ) $ (764,000 ) Cost of goods sold 114,000 191,000 Depreciation expense 370,000 406,000 Investment income (20,000 ) 0 Net income $ (448,000 ) $ (167,000 ) Retained earnings, 1/1/21 $ (1,204,000 ) $ (389,000 ) Net income (448,000 ) (167,000 ) Dividends declared 120,000 20,000 Retained earnings, 12/31/21 $ (1,532,000 ) $ (536,000 ) Current assets $ 342,000 $ 103,000 Investment in subsidiary 662,000 0 Equipment (net) 1,094,000 640,000 Buildings (net) 922,000 412,000 Land 708,000 147,000 Total assets $ 3,728,000 $ 1,302,000 Liabilities $ (1,296,000 ) $ (466,000 ) Common stock (900,000 ) (300,000 ) Retained earnings (1,532,000 ) (536,000 ) Total liabilities and equity $ (3,728,000 ) $ (1,302,000 ) Determine parent's investment income for 2021 under partial equity method and equity method.
Foxx Corporation acquired all of Greenburg Company’s outstanding stock on January 1, 2019, for $662,000 cash. Greenburg’s accounting records showed net assets on that date of $490,000, although equipment with a 10-year remaining life was undervalued on the records by $99,500. Any recognized goodwill is considered to have an indefinite life. Greenburg reports net income in 2019 of $106,000 and $133,000 in 2020. The subsidiary declared dividends of $20,000 in each of these two years. Account balances for the year ending December 31, 2021, follow. Credit balances are indicated by parentheses. Foxx Greenburg Revenues $ (912,000 ) $ (764,000 ) Cost of goods sold 114,000 191,000 Depreciation expense 370,000 406,000 Investment income (20,000 ) 0 Net income $ (448,000 ) $ (167,000 ) Retained earnings, 1/1/21 $ (1,204,000 ) $ (389,000 ) Net income (448,000 ) (167,000 ) Dividends declared 120,000 20,000 Retained earnings, 12/31/21 $ (1,532,000 ) $ (536,000 ) Current assets $ 342,000 $ 103,000 Investment in subsidiary 662,000 0 Equipment (net) 1,094,000 640,000 Buildings (net) 922,000 412,000 Land 708,000 147,000 Total assets $ 3,728,000 $ 1,302,000 Liabilities $ (1,296,000 ) $ (466,000 ) Common stock (900,000 ) (300,000 ) Retained earnings (1,532,000 ) (536,000 ) Total liabilities and equity $ (3,728,000 ) $ (1,302,000 ) Determine parent's investment income for 2021 under partial equity method and equity method.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Foxx Corporation acquired all of Greenburg Company’s outstanding stock on January 1, 2019, for $662,000 cash. Greenburg’s accounting records showed net assets on that date of $490,000, although equipment with a 10-year remaining life was undervalued on the records by $99,500. Any recognized
Greenburg reports net income in 2019 of $106,000 and $133,000 in 2020. The subsidiary declared dividends of $20,000 in each of these two years.
Account balances for the year ending December 31, 2021, follow. Credit balances are indicated by parentheses.
| Foxx | Greenburg | ||||||
| Revenues | $ | (912,000 | ) | $ | (764,000 | ) | |
| Cost of goods sold | 114,000 | 191,000 | |||||
| 370,000 | 406,000 | ||||||
| Investment income | (20,000 | ) | 0 | ||||
| Net income | $ | (448,000 | ) | $ | (167,000 | ) | |
| $ | (1,204,000 | ) | $ | (389,000 | ) | ||
| Net income | (448,000 | ) | (167,000 | ) | |||
| Dividends declared | 120,000 | 20,000 | |||||
| Retained earnings, 12/31/21 | $ | (1,532,000 | ) | $ | (536,000 | ) | |
| Current assets | $ | 342,000 | $ | 103,000 | |||
| Investment in subsidiary | 662,000 | 0 | |||||
| Equipment (net) | 1,094,000 | 640,000 | |||||
| Buildings (net) | 922,000 | 412,000 | |||||
| Land | 708,000 | 147,000 | |||||
| Total assets | $ | 3,728,000 | $ | 1,302,000 | |||
| Liabilities | $ | (1,296,000 | ) | $ | (466,000 | ) | |
| Common stock | (900,000 | ) | (300,000 | ) | |||
| Retained earnings | (1,532,000 | ) | (536,000 | ) | |||
| Total liabilities and equity | $ | (3,728,000 | ) | $ | (1,302,000 | ) | |
|
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