Assuming that Pride, in its internal records, accounts for its investment in Star using the equity method, what amount of retained earnings would Pride report on its January 1, 2021, consolidated balance sheet?
Required information
Skip to question
[The following information applies to the questions displayed below.]
On January 1, 2019, Pride Corporation purchased 90 percent of the outstanding voting shares of Star, Inc., for $477,000 cash. The acquisition-date fair value of the noncontrolling interest was $53,000. At January 1, 2019, Star’s net assets had a total carrying amount of $376,000. Equipment (eight-year remaining life) was undervalued on Star’s financial records by $66,400. Any remaining excess fair value over book value was attributed to a customer list developed by Star (four-year remaining life), but not recorded on its books. Star recorded net income of $58,100 in 2019 and $66,400 in 2020. Each year since the acquisition, Star has declared a $16,600 dividend. At January 1, 2021, Pride’s retained earnings show a $207,500 balance.
Selected account balances for the two companies from their separate operations were as follows:
Pride | Star | |||||
2021 Revenues | $ | 413,400 | $ | 236,600 | ||
2021 Expenses | 290,600 | 161,900 | ||||
Assuming that Pride, in its internal records, accounts for its investment in Star using the equity method, what amount of retained earnings would Pride report on its January 1, 2021, consolidated
Trending now
This is a popular solution!
Step by step
Solved in 2 steps