Haynes, Inc., obtained 100 percent of Turner Company’s common stock on January 1, 2020, by issuing 10,200 shares of $10 par value common stock. Haynes’s shares had a $15 per share fair value. On that date, Turner reported a net book value of $106,150. However, its equipment (with a five-year remaining life) was undervalued by $9,050 in the company’s accounting records. Also, Turner had developed a customer list with an assessed value of $37,800, although no value had been recorded on Turner’s books. The customer list had an estimated remaining useful life of 10 years.   The following balances come from the individual accounting records of these two companies as of December 31, 2020:     Haynes Turner Revenues $ (718,000 ) $ (332,000 ) Expenses   461,000     142,000   Investment income   Not given     0   Dividends declared   130,000     90,000     The following balances come from the individual accounting records of these two companies as of December 31, 2021:     Haynes Turner Revenues $ (895,000 ) $ (387,000 ) Expenses   482,200     181,700   Investment income   Not given     0   Dividends declared   150,000     80,000   Equipment   554,000     351,000       a. What balance does Haynes’s Investment in Turner account show on December 31, 2021, when the equity method is applied? b. What is the consolidated net income for the year ending December 31, 2021? c-1. What is the consolidated equipment balance as of December 31, 2021? c-2. Would this answer be affected by the investment method applied by the parent? d. Prepare entry *C for the beginning of the Retained Earnings account on a December 31, 2021 by using initial value, partial equity and equity method.

FINANCIAL ACCOUNTING
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ISBN:9781259964947
Author:Libby
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Chapter1: Financial Statements And Business Decisions
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Haynes, Inc., obtained 100 percent of Turner Company’s common stock on January 1, 2020, by issuing 10,200 shares of $10 par value common stock. Haynes’s shares had a $15 per share fair value. On that date, Turner reported a net book value of $106,150. However, its equipment (with a five-year remaining life) was undervalued by $9,050 in the company’s accounting records. Also, Turner had developed a customer list with an assessed value of $37,800, although no value had been recorded on Turner’s books. The customer list had an estimated remaining useful life of 10 years.

 

The following balances come from the individual accounting records of these two companies as of December 31, 2020:

 

  Haynes Turner
Revenues $ (718,000 ) $ (332,000 )
Expenses   461,000     142,000  
Investment income   Not given     0  
Dividends declared   130,000     90,000  
 


The following balances come from the individual accounting records of these two companies as of December 31, 2021:

 

  Haynes Turner
Revenues $ (895,000 ) $ (387,000 )
Expenses   482,200     181,700  
Investment income   Not given     0  
Dividends declared   150,000     80,000  
Equipment   554,000     351,000  
 

 

  1. a. What balance does Haynes’s Investment in Turner account show on December 31, 2021, when the equity method is applied?

  2. b. What is the consolidated net income for the year ending December 31, 2021?

  3. c-1. What is the consolidated equipment balance as of December 31, 2021?

  4. c-2. Would this answer be affected by the investment method applied by the parent?

  5. d. Prepare entry *C for the beginning of the Retained Earnings account on a December 31, 2021 by using initial value, partial equity and equity method.

 

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