Balance Sheet Amounts under Alternative Accounting Theories
Parsons Corporation purchased 75 percent ownership of Tumble Company on December 31, 20X7, for $210,000. Summarized balance sheet amounts for the companies on December 31, 20X7, prior to the purchase, were as follows:
| Parsons | Tumble Company | |
| Corporation | Book Value | Fair Value |
Cash and Inventory | $300,000 | $ 80,000 | $ 80,000 |
Buildings and Equipment (net) | 400,000 | 120,000 | 180,000 |
Total Assets | $700,000 | $200,000 | $260,000 |
Common Stock | $380,000 | $ 90,000 |
|
Retained Earnings | 320,000 | 110,000 |
|
Total Liabilities and Stockholders’ Equity | $700,000 | $200,000 |
|
Required
If consolidated financial statements are prepared, determine the amounts that would be reported as cash and inventory, buildings and equipment (net), and goodwill using the following consolidation alternatives:
a. Proprietary theory.
b. Parent company theory.
c. Entity theory.
d. Current accounting practice.
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