Maurice Tutor

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Category > Management Posted 13 Oct 2017 My Price 9.00

Quill Corporation

Income and Retained Earnings

Quill Corporation acquired 70 percent of North Company’s stock on January 1, 20X9, for $105,000. At that date, the fair value of the noncontrolling interest was equal to 30 percent of the book value of North Company. The companies reported the following stockholders’ equity balances immediately after the acquisition:

 

Quill Corporation

North Company

Common Stock

$120,000

$ 30,000

Additional Paid-in Capital

230,000

80,000

Retained Earnings

290,000

40,000

Total

$640,000

$150,000

Quill and North reported 20X9 operating incomes of $90,000 and $35,000 and dividend payments of $30,000 and $10,000, respectively.

Required

a. Compute the amount reported as net income by each company for 20X9, assuming Quill uses equity-method accounting for its investment in North.

b. Compute consolidated net income for 20X9.

c. Compute the reported balance in retained earnings at December 31, 20X9, for both companies.

d. Compute consolidated retained earnings at December 31, 20X9.

e. How would the computation of consolidated retained earnings at December 31, 20X9, change if Quill uses the cost method in accounting for its investment in North?

Answers

Maurice Tutor
(5)
Status NEW Posted 13 Oct 2017 03:10 PM My Price 9.00

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