Please help 15. Herbert, Inc., acquired all of Rambis Company\'s outstanding sto
ID: 2529119 • Letter: P
Question
Please help
15. Herbert, Inc., acquired all of Rambis Company's outstanding stock on January 1, 2014, for S574,000 in cash. Annual excess amortization of S12,000 results from this transaction. On the date of the takeover Herbert reported retained earnings of $400,000, and Rambis reported a $200,000 balance. Herbert reported internal net income of $40,000 in 2014 and S50,000 in 2015 and declared $10,000 in dividends each year. Rambis reported net income of $20,000 in 2014 and $30,000 in 2015 and declared $5,000 in dividends each year. a. Assume that Herbert's internal net income figures above do not include any income from the subsidiary. If the parent uses the equity method, what is the amount reported as consolidated retained earnings on December 31, 2014? Would the amount of consolidated retained earnings change if the parent had applied either the initial value or partial equity method for internal accounting purposes? b. Under each of the following situations, what is the Investment in Rambis account balance on Herbert's books on January 1, 2015 The parent uses the equity method. The parent uses the partial equity method. The parent uses the initial value method. c. Under each of the following situations, what is Entry *C on a 2015 consolidation worksheet? The parent uses the equity method. The parent uses the partial equity method The parent uses the initial value method.Explanation / Answer
A and B. What is the amount reported as consolidated Retained Earnings on December 31, 2014 and December 31, 2015?
Herbert (parent) balance—1/1/14.
400,000
Herbert income—2014.
40,000
Herbert dividends—2014 (subsidiary dividends arietta-entity and, thus, eliminated)
(10,000)
Rabbis income—2014 (not included in parent's income)
20,000
Amortization—2014
(12,000)
Consolidated retained earnings, 12/31/14
438,000
Consolidated retained earnings, 1/1/15
438,000
Herbert income—2015
50,000
Herbert dividends—2015..
(10,000)
Rabbis income—2015
30,000
Amortization—2015
(12,000)
Consolidated retained earnings, 12/31/15
496,000
C and D
Investment in Rabbis—equity method
Rabbi’s fair value 1/1/14.
574,000
Rabbi’s income 2014...
20,000
Rabbi’s dividend 2014...
(5,000)
Herbert’s 2014 excess fair over book value amortization
(12,000)
Rabbis fair value 1/1/15
577,000
Herbert (parent) balance—1/1/14.
400,000
Herbert income—2014.
40,000
Herbert dividends—2014 (subsidiary dividends arietta-entity and, thus, eliminated)
(10,000)
Rabbis income—2014 (not included in parent's income)
20,000
Amortization—2014
(12,000)
Consolidated retained earnings, 12/31/14
438,000
Consolidated retained earnings, 1/1/15
438,000
Herbert income—2015
50,000
Herbert dividends—2015..
(10,000)
Rabbis income—2015
30,000
Amortization—2015
(12,000)
Consolidated retained earnings, 12/31/15
496,000