Reference no: EM131827694

Problem - Herbert, Inc., acquired all of Rambis Company's outstanding stock on January 1, 2012, for $642,000 in cash. Annual excess amortization of $11,200 results from this transaction. On the date of the takeover, Herbert reported retained earnings of $497,000, and Rambis reported a $280,000 balance. Herbert reported internal income of $54,750 in 2012 and $68,650 in 2013 and paid $10,000 in dividends each year. Rambis reported net income of $21,300 in 2012 and $35,200 in 2013 and paid $5,000 in dividends each year.
Assume that Herbert's internal income figures above do not include any income from the subsidiary.

a-1. If the parent uses the equity method, what is the amount reported as consolidated retained earnings on December 31, 2013?

a-2. What would be the amount of consolidated retained earnings on December 31, 2012 if the parent had applied either the initial value or partial equity method for internal accounting purposes?