Foxx Corporation acquired all of Greenburg Company’s outstanding stock on January 1, 2011, for $600,000 cash. Greenburg’s accounting records showed net assets on that date of $470,000, although equipment with a 10-year life was undervalued on the records by $90,000. Any recognized goodwill is considered to have an indefinite life. Greenburg reports net income in 2011 of $90,000 and $100,000 in 2012. The subsidiary paid dividends of $20,000 in each of these two years. Financial figures for the year ending December 31, 2013, follow. Credit balances are indicated by parentheses.

Foxx	Greenburg
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, 1/1/13	($1,100,000)	($320,000)
Net income	420,000	100,000
Dividends paid	120,000	20,000
Retained earnings, 12/31/13	($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)

a. Determine the December 31, 2013, consolidated balance for each of the following accounts:

Depreciation Expense	Buildings
Dividends Paid	Goodwill
Revenues	Common Stock
Equipment

b. How does the parent’s choice of an accounting method for its investment affect the balances computed in requirement (a)?

c. Which method of accounting for this subsidiary is the parent actually using for internal reporting purposes?

d. If the parent company had used a different method of accounting for this investment, how could that method have been identified?

e. What would be Foxx’s balance for retained earnings as of January 1, 2013, if each of the following methods had been in use?

Initial value method

Partial equity method

Equity method