Hammock Inc
Subject:AccountingPrice:2.87 Bought7
Hammock Inc. acquired all of the common stock that was outstanding of Iceberg Company on 1/1/16. As a result of this acquisition, there will be annual amortization in the amount of $55,000. Hammock reported a retained earnings balance of $510,000 and Iceberg reported a retained earnings balance of $145,000 on the date of acquisition. In addition, Hammock had net income for 2016 in the amount of $95,000 and net income for 2017 in the amount of $105,000. Hammock also paid dividends in the amount of $40,000 both in 2016 and 2017. Iceberg had net income for 2016 in the amount of $50,000 and net income for 2017 in the amount of $60,000. In addition, Iceberg paid dividends in the amount of $8,000 both in 2016 and 2017.
Assume that Hammock includes the Equity in Subsidiary income in their reported net income. If Hammock uses the partial equity method for net income, what are the consolidated retained earnings on 12/31/17?
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Answer:
|
Hammock’s Retained Earnings on Jan. 1, 2016 |
510,000 |
|
|
Add: Net income of Hammock for 2016 |
95,000 |
|
|
Less: Dividend paid by Hammock for 2016 |
(40,000) |
55,000 |
|
Add: Net income of Iceberg for 2016 |
50,000 |
|
|
Less: Amortization-2016 |
(55,000) |
(5,000) |
|
Consolidated Retained Earnings on Dec. 31, 2016 |
560,000 |
|
|
Add: Net income of Hammock for 2017 |
105,000 |
|
|
Less: Dividend paid by Hammock for 2017 |
(40,000) |
65,000 |
|
Add: Net income of Iceberg for 2017 |
60,000 |
|
|
Less: Amortization-2017 |
(55,000) |
5000 |
|
Consolidated Retained Earning on Dec. 31, 2017 |
630,000 |
