Question

Hello. I am trying to figure out how you get the amount of $480,000 in the 1/1/18 stockholder's equity balance in the solutions section (where I drew a blue arrow). Please provide your response and all side calculations in Word or Excel format as it is easy to read. I appreciate it.

LO 3-1, 3-4 23. Following are selected account balances from Penske Company and Stanza Corporation as of December 31, 2018: Penske Stanza Revenues Cost of goods sold. Depreciation expense Investment income Dividends declared. Retained earnings, 1/1/18. Current assets. Copyrights Royalty agreements Investment in Stanza Liabilities. Common stock Addilional paid-in Capital. $(700,000) 250,000 150,000 Not given 80,000 (600,000) 400,000 900,000 600,000 Not given (500,000) (600,000) ($20 par) (150,000) $(400,000) 100,000 200,000 -0- 60,000 (200,000) 500,000 400,000 1,000,000 -0- (1,380,000) (200,000) ($10 par) (80,000) On January 1, 2018, Penske acquired all of Stanza's outstanding stock for $680,000 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 $440,000 book value but a fair value of $560,000. a. As of December 31, 2018, what is the consolidated copyrights balance? b. For the year ending December 31, 2018, what is consolidated net income? As of December 31, 2018, what is the consolidated retained earnings balance? d. As of December 31, 2018, what is the consolidated balance to be reported for goodwill? c.

Answer 1

Please refer the following image for the solution:  

Book value of subsidiary i.e of Stanza Corporation Retained Earnings 1/1/8 $ 200,000 Add: Common stock of Stanza Corporation $ 200,000 Add: Additional Paid in Capital of Stanza Corporation $ 80,000 Book value of subsidiary $ 480,000