On January 1, year 2, ABC Company exchanged 150,000 shares of its P20 par value common stock for all of XYZ's net assets. Both corporations continued to operate as separate businesses, maintaining accounting records with years ending December 31. ABC uses the equity method to account for its investment in XYZ. Information from separate company operations follows: Retained earnings-12/31/Y1 (ABC) P3,200,000 and (XYZ) P925,000 Net income-six months ended 6/30/Y2 (ABC) P800,000 and (XYZ) P275,000 Dividends paid-3/25/Y2 by ABC was P750,000 What amount of retained earnings would ABC reports in its June 30, year 2 consolidated balance sheet? The answer is 3,250,000. How is this solved?
On January 1, year 2, ABC Company exchanged 150,000 shares of its P20 par value common stock for all of XYZ's net assets. Both corporations continued to operate as separate businesses, maintaining accounting records with years ending December 31. ABC uses the equity method to account for its investment in XYZ. Information from separate company operations follows:
(ABC) P3,200,000 and (XYZ) P925,000
Net income-six months ended 6/30/Y2
(ABC) P800,000 and (XYZ) P275,000
Dividends paid-3/25/Y2 by ABC was P750,000
What amount of retained earnings would ABC reports in its June 30, year 2 consolidated balance sheet?
The answer is 3,250,000. How is this solved?
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