Parkovash, Incorporated, obtained 100 percent of Salerno Company's common stock on January 1, 2023, by issuing 11,700 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 $134,050. However, its equipment (with a 5-year remaining life) was undervalued by $7,550 in the company's accounting records. Also, Salerno had developed computer software with an assessed value of $33,900, although no value had been recorded on Salerno's books. The computer software had an estimated remaining useful life of 10 years.

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Chapter1: Financial Statements And Business Decisions
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Parkovash, Incorporated, obtained 100 percent of Salerno Company's common stock on January 1, 2023, by issuing 11,700 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
$134,050. However, its equipment (with a 5-year remaining life) was undervalued by $7,550 in the company's accounting records. Also,
Salerno had developed computer software with an assessed value of $33,900, 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:
Salerno
$ (240,000)
125,000
0
50,000
Items
Revenues
Expenses
Investment income
Dividends declared
The following balances come from the individual accounting records of these two companies as of December 31, 2024:
Salerno
$(310,000)
162, 100
0
Items
Parkovash
$ (730,000)
493,000
Not given
120,000
Revenues
Expenses
Investment income
Dividends declared
Equipment
Parkovash
$ (913,000)
519,300
Not given
140,000
572,000
30,000
383,000
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?
c-2. Would this answer be affected by the investment method applied by the parent?
d. Prepare entry *C for the beginning of the Retained Earnings account on a December 31, 2024 by using initial value, partial equity
and equity method.
Transcribed Image Text:Parkovash, Incorporated, obtained 100 percent of Salerno Company's common stock on January 1, 2023, by issuing 11,700 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 $134,050. However, its equipment (with a 5-year remaining life) was undervalued by $7,550 in the company's accounting records. Also, Salerno had developed computer software with an assessed value of $33,900, 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: Salerno $ (240,000) 125,000 0 50,000 Items Revenues Expenses Investment income Dividends declared The following balances come from the individual accounting records of these two companies as of December 31, 2024: Salerno $(310,000) 162, 100 0 Items Parkovash $ (730,000) 493,000 Not given 120,000 Revenues Expenses Investment income Dividends declared Equipment Parkovash $ (913,000) 519,300 Not given 140,000 572,000 30,000 383,000 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? c-2. Would this answer be affected by the investment method applied by the parent? d. Prepare entry *C for the beginning of the Retained Earnings account on a December 31, 2024 by using initial value, partial equity and equity method.
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