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On January 1, two years ago, Parkway Corporation purchased all of the outstanding common stock of Shaw Company for $220,000 cash. On that date, Shaw's net assets had a book value of $148,000. Equipment with an 8-year life was undervalued by $20,000 in Shaw's financial records. Shaw has a database that is valued at $52,000 and will be amortized over ten years. Shaw reported net income of $25,000 in the year of acquisition and $32,500 in the following year. Dividends of $2,500 were declared and paid in each of those two years. The third year of operations is now complete. For each of the two companies, selected account balances as of December 31 for this third year are as follows: Revenues Expenses Equipment (net) Retained Earnings, beginning of the year Dividend Paid A. B. C. D. E. Equity Partial Equity Method For each of the three methods discussed in the chapter, what should be the Investment in Shaw Company account balance in the records of Parkway Corporation at December 31 of the third year? $ 282,500 286,900 262,500 328,000 277,500 Parkway Shaw $ 250,000 $ 142,500 Method $ 302,900 310,000 277,500 292,500 292,900 175,000 125,000 150,000 25,000 100,000 60,000 75,500 5,000 Initial Value Method $ 220,000 220,000 220,000 220,000 220,000

On January 1, two years ago, Parkway Corporation purchased all of the outstanding common stock of Shaw Company for $220,000 cash. On that date, Shaw's net assets had a book value of $148,000. Equipment with an 8-year life was undervalued by $20,000 in Shaw's financial records. Shaw has a database that is valued at $52,000 and will be amortized over ten years. Shaw reported net income of $25,000 in the year of acquisition and $32,500 in the following year. Dividends of $2,500 were declared and paid in each of those two years. The third year of operations is now complete. For each of the two companies, selected account balances as of December 31 for this third year are as follows: Revenues Expenses Equipment (net) Retained Earnings, beginning of the year Dividend Paid A. B. C. D. E. Equity Partial Equity Method For each of the three methods discussed in the chapter, what should be the Investment in Shaw Company account balance in the records of Parkway Corporation at December 31 of the third year? $ 282,500 286,900 262,500 328,000 277,500 Parkway Shaw $ 250,000 $ 142,500 Method $ 302,900 310,000 277,500 292,500 292,900 175,000 125,000 150,000 25,000 100,000 60,000 75,500 5,000 Initial Value Method $ 220,000 220,000 220,000 220,000 220,000

Intermediate Accounting: Reporting And Analysis
Intermediate Accounting: Reporting And Analysis
3rd Edition
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Chapter22: Accounting For Changes And Errors.
Section: Chapter Questions
Problem 7RE: Bliss Company owns an asset with an estimated life of 15 years and an estimated residual value of...
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On January 1, two years ago, Parkway Corporation purchased all of the outstanding common stock of Shaw Company for $220,000 cash. On that date, Shaw's net assets had a book value of $148,000. Equipment with an 8-year life was undervalued by $20,000 in Shaw's financial records. Shaw has a database that is valued at $52,000 and will be amortized over ten years. Shaw reported net income of $25,000 in the year of acquisition and $32,500 in the following year. Dividends of $2,500 were declared and paid in each of those two years. The third year of operations is now complete. For each of the two companies, selected account balances as of December 31 for this third year are as follows: Revenues Expenses Equipment (net) Retained Earnings, beginning of the year Dividend Paid A. B. C. D. E. Parkway Shaw $ 250,000 $ 142,500 For each of the three methods discussed in the chapter, what should be the Investment in Shaw Company account balance in the records of Parkway Corporation at December 31 of the third year? $ 282,500 286,900 262,500 328,000 277,500 Equity Partial Equity Initial Value Method Method $ 302,900 310,000 277,500 292,500 292,900 175,000 125,000 150,000 25,000 Method $ 220,000 220,000 220,000 220,000 220,000 100,000 60,000 75,500 5,000
Transcribed Image Text:On January 1, two years ago, Parkway Corporation purchased all of the outstanding common stock of Shaw Company for $220,000 cash. On that date, Shaw's net assets had a book value of $148,000. Equipment with an 8-year life was undervalued by $20,000 in Shaw's financial records. Shaw has a database that is valued at $52,000 and will be amortized over ten years. Shaw reported net income of $25,000 in the year of acquisition and $32,500 in the following year. Dividends of $2,500 were declared and paid in each of those two years. The third year of operations is now complete. For each of the two companies, selected account balances as of December 31 for this third year are as follows: Revenues Expenses Equipment (net) Retained Earnings, beginning of the year Dividend Paid A. B. C. D. E. Parkway Shaw $ 250,000 $ 142,500 For each of the three methods discussed in the chapter, what should be the Investment in Shaw Company account balance in the records of Parkway Corporation at December 31 of the third year? $ 282,500 286,900 262,500 328,000 277,500 Equity Partial Equity Initial Value Method Method $ 302,900 310,000 277,500 292,500 292,900 175,000 125,000 150,000 25,000 Method $ 220,000 220,000 220,000 220,000 220,000 100,000 60,000 75,500 5,000
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