Question

please help with a,b,c,d

The following are selected account balances from Penske Company and Stanza Corporation as of December 31, 2021; $ $ Revenues Cost of goods sold Depreciation expense Investment income Dividends declared Retained earnings, 1/1/21 Current assets Copyrights Royalty agreements Investment in Stanza Liabilities Common stock Additional paid-in capital Penske (726,000) 259,100 198,000 Not given 80,000 (604,000) 514,000 984,000 650,000 Not given (570,000) (600,000) ($20 par) (150,000) Stanza (768,000) 192,000 230,000 0 60,000 (252,000) 506,000 472,500 1,088,000 0 (1,248,500) (200,000) ($10 par) (80,000) Note: Parentheses indicate a credit balance. On January 1, 2021, Penske acquired all of Stanza's outstanding stock for $759,000 fair value in cash and common stock. Penske also paid $10,000 in stock issuance costs. At the date of acquisition, copyrights (with a six-year remaining life) have a $570,000 book value but a fair value of $696,000. a. As of December 31, 2021, what is the consolidated copyrights balance? b. For the year ending December 31, 2021, what is consolidated net income? c. As of December 31, 2021, what is the consolidated retained earnings balance? d. As of December 31, 2021, what is the consolidated balance to be reported for goodwill? Amounts Consolidated copyrights Consolidated net income b

Answer 1

a. Consolidated Copyrights

	Penske	Stanza
Book Value	984,000	472,500
Excess fair value of copyrights (696,000-570,000)		126,000
Amortization of excess fair value (126,000/6years)		(21000)
Total	984,000	577,500

Consolidated copyrights = 984000 +577,500 = 1561,500

b.

	Penske	Stanza	Total
Income	726,000	768,000
Less: cost of goods sold	259,100	192,000
Depreciation expense	198,000	230,000
	268,900	346,000	614,900
Less: amortization of excess fair value copyrights			(21000)
Consolidated net income			593,900

c.

Consolidated retained earnings= Opening retained earnings + consolidated net income – dividend declared = 604,000 + 593,900 – 80,000 = $ 1,117,900

d. Computation of goodwill

	Amount
Acquisition cost	759,000
Less: Book value of subsidiaries
Opening retained earnings + Common stock + Additional paid in capital
252,000 + 200,000 + 80,000	532,000
Fair value in excess of book value	227,000
Less: allocation of copyrights	126,000
Goodwill	101,000

Answer 2

How come you add the net incomes of both the parent and the sub? Aren't you not able to add accross net income? Basically why is the net income not just the parent's net income?