Herbert, Inc., acquired all of Rambis Company’s outstanding stock on January 1, 2017, for $574,000 in cash. Annual excess amortization of $12,000 results from this transaction. On the date of the takeover, Herbert reported retained earnings of $400,000, and Rambis reported a $200,000 balance. Herbert reported internal net income of $40,000 in 2017 and $50,000 in 2018 and declared $10,000 in dividends each year. Rambis reported net income of $20,000 in 2017 and $30,000 in 2018 and declared $5,000 in dividends each year. Assume that Herbert's internal net income figures above do not include any income from the subsidiary.If the parent uses the equity method, what is the amount reported as consolidated retained earnings on December 31, 2018?What would be the amount of consolidated retained earnings on December 31, 2018, if the parent had applied either theinitial value or partial equity method for internal accounting purposes?Show lessAConsolidated retained earnings (equity method)496,000Consolidated retained earnings (initial value method)$Consolidated retained earnings (partial equity method)$

Consolidation refers to adding up financial figures of two or more separate entities in systematic…

Answered: Herbert, Inc., acquired all of Rambis…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

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Herbert, Inc., acquired all of Rambis Company’s outstanding stock on January 1, 2017, for $574,000 in cash. Annual excess amortization of $12,000 results from this transaction. On the date of the takeover, Herbert reported retained earnings of $400,000, and Rambis reported a $200,000 balance. Herbert reported internal net income of $40,000 in 2017 and $50,000 in 2018 and declared $10,000 in dividends each year. Rambis reported net income of $20,000 in 2017 and $30,000 in 2018 and declared $5,000 in dividends each year.

Assume that Herbert's internal net income figures above do not include any income from the subsidiary.
If the parent uses the equity method, what is the amount reported as consolidated retained earnings on December 31, 2018?
What would be the amount of consolidated retained earnings on December 31, 2018, if the parent had applied either the
initial value or partial equity method for internal accounting purposes?
Show lessA
Consolidated retained earnings (equity method)
496,000
Consolidated retained earnings (initial value method)
$
Consolidated retained earnings (partial equity method)
$

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