Parent Company acquired all of Sub Company’s outstanding stock on January 1, 2019 for $600,000 cash. Sub’s accounting records showed net assets on that date of $470,000 although equipment with a 10-year remaining life was undervalued on the records by $90,000. Any recognized goodwill is considered to have an indefinite life. Sub reports net income in 2019 of $90,000 and $100,000 in 2020 and declared dividends of $20,000 in each of these two years. Account balances for the year ending December 31, 2021 follow. Credit balances are indicated by parentheses. Parent Sub Revenues (800,000) (600,000) Cost of Goods Sold 100,000 150,000 Depreciation Expense 300,000 350,000 Investment Income (20,000) - 0 – Net Income (420,000) (100,000) Retained Earnings, 1/1/21 (1,100,000) (320,000) Net Income (420,000) (100,000) Dividends Declared 120,000 20,000 Retained Earnings 12/31/21 (1,400,000) (400,000) Current Assets 300,000 100,000 Investment in Subsidiary 600,000 - 0 – Equipment (net) 900,000 600,000 Buildings (net) 800,000 400,000 Land 600,000 100,000 Total Assets 3,200,000 1,200,000 Liabilities (900,000) (500,000) Common Stock (900,000) (300,000) Retained Earnings (1,400,000) (400,000) Total Liabilities and equity (3,200,000) (1,200,000) Determine the December 31,2021 consolidated balance for each of the following accounts: Goodwill and Common Stock
Parent Company acquired all of Sub Company’s outstanding stock on January 1, 2019 for $600,000 cash. Sub’s accounting records showed net assets on that date of $470,000 although equipment with a 10-year remaining life was undervalued on the records by $90,000. Any recognized
Parent Sub
Revenues (800,000) (600,000)
Cost of Goods Sold 100,000 150,000
Investment Income (20,000) - 0 –
Net Income (420,000) (100,000)
Net Income (420,000) (100,000)
Dividends Declared 120,000 20,000
Retained Earnings 12/31/21 (1,400,000) (400,000)
Current Assets 300,000 100,000
Investment in Subsidiary 600,000 - 0 –
Equipment (net) 900,000 600,000
Buildings (net) 800,000 400,000
Land 600,000 100,000
Total Assets 3,200,000 1,200,000
Liabilities (900,000) (500,000)
Common Stock (900,000) (300,000)
Retained Earnings (1,400,000) (400,000)
Total Liabilities and equity (3,200,000) (1,200,000)
Determine the December 31,2021 consolidated balance for each of the following accounts: Goodwill and Common Stock
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