Large Ltd. purchased 70% of Small Company on January 1, Year 6, for $630,000, when the statement of financial position for Small showed common shares of $530,000 and retained earnings of $230,000. On that date, the inventory of Small was undervalued by $59,000, and a patent with an estimated remaining life of five years was overvalued by $84,000. Small reported the following subsequent to January 1, Year 6: Year 6 Year 7 Year 8 Profit (Loss) Dividends $38,000 23,000 53,000 $132,000 (48,000) 103,000 A test for goodwill impairment on December 31, Year 8, indicated a loss of $20,600 should be reported for Year 8 on the consolidated income statement. Large uses the cost method to account for its investment in Small and reported the following for Year 8 for its separate-entity statement of changes in equity: Retained earnings, beginning Profit Dividends Retained earnings, end $630,000 330,000 (57,000) $ 903,000
Large Ltd. purchased 70% of Small Company on January 1, Year 6, for $630,000, when the statement of financial position for Small showed common shares of $530,000 and retained earnings of $230,000. On that date, the inventory of Small was undervalued by $59,000, and a patent with an estimated remaining life of five years was overvalued by $84,000. Small reported the following subsequent to January 1, Year 6: Year 6 Year 7 Year 8 Profit (Loss) Dividends $38,000 23,000 53,000 $132,000 (48,000) 103,000 A test for goodwill impairment on December 31, Year 8, indicated a loss of $20,600 should be reported for Year 8 on the consolidated income statement. Large uses the cost method to account for its investment in Small and reported the following for Year 8 for its separate-entity statement of changes in equity: Retained earnings, beginning Profit Dividends Retained earnings, end $630,000 330,000 (57,000) $ 903,000
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
Karan
Subject: acounting
Transcribed Image Text:Large Ltd. purchased 70% of Small Company on January 1, Year 6, for $630,000, when the statement of financial position for Small
showed common shares of $530,000 and retained earnings of $230,000. On that date, the inventory of Small was undervalued by
$59,000, and a patent with an estimated remaining life of five years was overvalued by $84,000.
Small reported the following subsequent to January 1, Year 6:
Profit
(Loss) Dividends
$132,000 $38,000
(48,000) 23,000
103,000
53,000
Year 6
Year 7
Year 8
A test for goodwill impairment on December 31, Year 8, indicated a loss of $20,600 should be reported for Year 8 on the consolidated
income statement. Large uses the cost method to account for its investment in Small and reported the following for Year 8 for its
separate-entity statement of changes in equity:
Retained earnings, beginning
Profit
Dividends
Retained earnings, end
$ 630,000
330,000
(57,000)
$ 903,000
Transcribed Image Text:Year 8
No
1
2
3
Date
Year 8
Year 8
Year 8
Investment in Small
Equity method income
Cash
Investment in Small
Equity method income
Investment in Small
General Journal
››
$ 610,100
Debit
72,100
37,100
37,400 X
(ii) Determine the investment in Small at December 31, Year 8. (Omit $ sign in your response.)
Investment in Small under equity method
Credit
72,100
37,100
37,400
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