Parkovash, Incorporated, obtained 100 percent of Salerno Company's common stock on January 1, 2023, by issuing 8,800 shares of $10 par value common stock. Parkovash's shares had a $15 per share fair value. On that date, Salerno reported a net book value of $86,450. However, its equipment (with a 5-year remaining life) was undervalued by $7,350 in the company's accounting records. Also, Salerno had developed computer software with an assessed value of $38,200, although no value had been recorded on Salerno's books. The computer software had an estimated remaining useful life of 10 years. The following balances come from the individual accounting records of these two companies as of December 31, 2023: Revenues Expenses Items Investment income Dividends declared Parkovash $ (712,000) 522,000 Not given 100,000 Salerno $ (420,000) 217,000 0 100,000 The following balances come from the individual accounting records of these two companies as of December 31, 2024: Revenues Expenses Items Investment income Dividends declared Equipment Parkovash $ (892,000) Salerno $(478,500) 251,300 0 80,000 548,000 357,000 550,800 Not given 120,000 Required: a. What balance does Parkovash's Investment in Salerno account show on December 31, 2024, when the equity method is applied? b. What is the consolidated net income for the year ending December 31, 2024? c-1. What is the consolidated equipment balance as of December 31, 2024?
Parkovash, Incorporated, obtained 100 percent of Salerno Company's common stock on January 1, 2023, by issuing 8,800 shares of $10 par value common stock. Parkovash's shares had a $15 per share fair value. On that date, Salerno reported a net book value of $86,450. However, its equipment (with a 5-year remaining life) was undervalued by $7,350 in the company's accounting records. Also, Salerno had developed computer software with an assessed value of $38,200, although no value had been recorded on Salerno's books. The computer software had an estimated remaining useful life of 10 years. The following balances come from the individual accounting records of these two companies as of December 31, 2023: Revenues Expenses Items Investment income Dividends declared Parkovash $ (712,000) 522,000 Not given 100,000 Salerno $ (420,000) 217,000 0 100,000 The following balances come from the individual accounting records of these two companies as of December 31, 2024: Revenues Expenses Items Investment income Dividends declared Equipment Parkovash $ (892,000) Salerno $(478,500) 251,300 0 80,000 548,000 357,000 550,800 Not given 120,000 Required: a. What balance does Parkovash's Investment in Salerno account show on December 31, 2024, when the equity method is applied? b. What is the consolidated net income for the year ending December 31, 2024? c-1. What is the consolidated equipment balance as of December 31, 2024?
Chapter7: Corporations: Reorganizations
Section: Chapter Questions
Problem 40P
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Transcribed Image Text:Parkovash, Incorporated, obtained 100 percent of Salerno Company's common stock on January 1, 2023, by issuing 8,800 shares of
$10 par value common stock. Parkovash's shares had a $15 per share fair value. On that date, Salerno reported a net book value of
$86,450. However, its equipment (with a 5-year remaining life) was undervalued by $7,350 in the company's accounting records. Also,
Salerno had developed computer software with an assessed value of $38,200, although no value had been recorded on Salerno's
books. The computer software had an estimated remaining useful life of 10 years.
The following balances come from the individual accounting records of these two companies as of December 31, 2023:
Revenues
Expenses
Items
Investment income
Dividends declared
Parkovash
$ (712,000)
522,000
Not given
100,000
Salerno
$ (420,000)
217,000
0
100,000
The following balances come from the individual accounting records of these two companies as of December 31, 2024:
Revenues
Expenses
Items
Investment income
Dividends declared
Equipment
Parkovash
$ (892,000)
Salerno
$(478,500)
251,300
0
80,000
548,000
357,000
550,800
Not given
120,000
Required:
a. What balance does Parkovash's Investment in Salerno account show on December 31, 2024, when the equity method is applied?
b. What is the consolidated net income for the year ending December 31, 2024?
c-1. What is the consolidated equipment balance as of December 31, 2024?
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