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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

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Karan

Subject: acounting 

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: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
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
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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