Reference no: EM132596379

Question - Haynes, Inc., obtained 100 percent of Turner Company's common stock on January 1, 2017, by issuing 8,800 shares of $10 par value common stock. Haynes's shares had a $15 per share fair value. On that date, Turner reported a net book value of $86,450. However, its equipment (with a five-year remaining life) was undervalued by $7,350 in the company's accounting records. Also, Turner had developed a customer list with an assessed value of $38,200, although no value had been recorded on Turner's books. The customer list had an estimated remaining useful life of 10 years.

The following balances come from the individual accounting records of these two companies as of December 31, 2017:

Haynes Turner Revenues $(712,000) $(420,000)

Expenses 522,000 217,000

Investment income Not given 0 Dividends declared 100,000 100,000

The following balances come from the individual accounting records of these two companies as of December 31, 2018:

Haynes Turner Revenues $(892,000) $(478,500)

Expenses 550,800 251,300

Investment income Not given 0 Dividends declared 120,000 80,000

Equipment 548,000 357,000

1. a. What balance does Haynes's Investment in Turner account show on December 31, 2018, when the equity method is applied?

2. b. What is the consolidated net income for the year ending December 31, 2018?

3. c-1. What is the consolidated equipment balance as of December 31, 2018?

4. c-2. Would this answer be affected by the investment method applied by the parent?

5. d. Prepare entry *C for the beginning of the Retained Earnings account on a December 31, 2018 by using initial value, partial equity and equity method.