On January 1, 20x1, ABC Corporationpurchased all of XYZ Corporation's commonstock for $1,200,000. On that date, the fairvalues of XYZ's assets and liabilities equaledtheir carrying amounts of $1,320,000 and$320,000, respectively. During year 1, XYZpaid cash dividends of $20,000. Selectedinformation from the separate balancesheets and income statements of ABC andXYZ as of December 31, year 1, and for theyear then ended follows: ABC Corporation(Column 1), XYZ Corporation (Column 2) Balance sheet accountsInvestment in subsidiaryRetained earningsTotal stockholders' equity$1,320,0001,240,0002,620,000560,0001,120,000Income statement accountsOperating incomeEquity in earnings of SharpNet income420,000140,000400,000200,000140,000In Owen's December 31, year 1 consolidated balancesheet, what amount should be reported as total retainedearnings?In ABC's December 31, year 1 consolidated balancesheet, what amount should be reported as total retainedearnings?

Answered: In ABC's December 31, year 1…

Financial Accounting

15th Edition

ISBN:9781337272124

Author:Carl Warren, James M. Reeve, Jonathan Duchac

Publisher:Carl Warren, James M. Reeve, Jonathan Duchac

Chapter13: Corporations: Organization, Stock Transactions, And Dividends

Section: Chapter Questions

Problem 22E

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Question

On January 1, 20x1, ABC Corporation
purchased all of XYZ Corporation's common
stock for $1,200,000. On that date, the fair
values of XYZ's assets and liabilities equaled
their carrying amounts of $1,320,000 and
$320,000, respectively. During year 1, XYZ
paid cash dividends of $20,000. Selected
information from the separate balance
sheets and income statements of ABC and
XYZ as of December 31, year 1, and for the
year then ended follows: ABC Corporation
(Column 1), XYZ Corporation (Column 2)

Balance sheet accounts
Investment in subsidiary
Retained earnings
Total stockholders' equity
$1,320,000
1,240,000
2,620,000
560,000
1,120,000
Income statement accounts
Operating income
Equity in earnings of Sharp
Net income
420,000
140,000
400,000
200,000
140,000
In Owen's December 31, year 1 consolidated balance
sheet, what amount should be reported as total retained
earnings?
In ABC's December 31, year 1 consolidated balance
sheet, what amount should be reported as total retained
earnings?

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