On July 1, 2005, Parson Corporation acquired all the outstanding common stock of Scate Company for $900,000. On that date, the carrying amount of Scate's identifiable net assets was $800,000. The difference of $100,000 was allocated as follows:
Scate had a net income of $190,000 and declared dividends of $100,000 for the fiscal year ended June 30, 2006. Scate uses straight-line depreciation for plant assets. Goodwill was one-thirtieth impaired on June 30, 2006.
Prepare a working paper to compute the following for Parson Corporation under the equity method of accounting (disregard income taxes):
a. Balance of Intercompany Investment Income ledger account on June 30, 2006
b. Balance of Investment in Scate Company Common Stock ledger account on June 30, 2006

Question

On July 1, 2005, Parson Corporation acquired all the outstanding common stock of Scate Company for $900,000. On that date, the carrying amount of Scate's identifiable net assets was $800,000. The difference of $100,000 was allocated as follows:
  Scate had a net income of $190,000 and declared dividends of $100,000 for the fiscal year ended June 30, 2006. Scate uses straight-line depreciation for plant assets. Goodwill was one-thirtieth impaired on June 30, 2006.
Prepare a working paper to compute the following for Parson Corporation under the equity method of accounting (disregard income taxes):
a. Balance of Intercompany Investment Income ledger account on June 30, 2006
b. Balance of Investment in Scate Company Common Stock ledger account on June 30, 2006

Quizplus · Accepted Answer

The Answer of On July 1, 2005, Parson Corporation acquired all the outstanding common stock of Scate Company for $900,000. On that date, the carrying amount of Scate's identifiable net assets was $800,000. The difference of $100,000 was allocated as follows:
  Scate had a net income of $190,000 and declared dividends of $100,000 for the fiscal year ended June 30, 2006. Scate uses straight-line depreciation for plant assets. Goodwill was one-thirtieth impaired on June 30, 2006.
Prepare a working paper to compute the following for Parson Corporation under the equity method of accounting (disregard income taxes):
a. Balance of Intercompany Investment Income ledger account on June 30, 2006
b. Balance of Investment in Scate Company Common Stock ledger account on June 30, 2006

On July 1, 2005, Parson Corporation Acquired All the Outstanding