On January 1, year 2, ABC Company exchanged 150,000 shares of its P20 par value common stock for all of XYZ's net assets. Both corporations continued to operate as separate businesses, maintaining accounting records with years ending December 31. ABC uses the equity method to account for its investment in XYZ. Information from separate company operations follows: Retained earnings-12/31/Y1 (ABC) P3,200,000 and (XYZ) P925,000 Net income-six months ended 6/30/Y2 (ABC) P800,000 and (XYZ) P275,000 Dividends paid-3/25/Y2 by ABC was P750,000 What amount of retained earnings would ABC reports in its June 30, year 2 consolidated balance sheet? The answer is 3,250,000. How is this solved?

On January 1, year 2, ABC Company exchanged 150,000 shares of its P20 par value common stock for all of XYZ's net assets. Both corporations continued to operate as separate businesses, maintaining accounting records with years ending December 31. ABC uses the equity method to account for its investment in XYZ. Information from separate company operations follows: Retained earnings-12/31/Y1 (ABC) P3,200,000 and (XYZ) P925,000 Net income-six months ended 6/30/Y2 (ABC) P800,000 and (XYZ) P275,000 Dividends paid-3/25/Y2 by ABC was P750,000 What amount of retained earnings would ABC reports in its June 30, year 2 consolidated balance sheet? The answer is 3,250,000. How is this solved?

SWFT Comprehensive Volume 2019

42nd Edition

ISBN:9780357233306

Author:Maloney

Publisher:Maloney

Chapter22: S Corporations

Section: Chapter Questions

Problem 35P

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On January 1, year 2, ABC Company exchanged 150,000 shares of its P20 par value common stock for all of XYZ's net assets. Both corporations continued to operate as separate businesses, maintaining accounting records with years ending December 31. ABC uses the equity method to account for its investment in XYZ. Information from separate company operations follows: Retained earnings-12/31/Y1 (ABC) P3,200,00 and (XYZ) P925,000; Net income - six months ended 6/30/Y2 (ABC) P800,000 and (XYZ) P275,000; Dividends paid-3/25/Y2 by ABC was P750,000. What amount of retained earnings would ABC reports in its June 30, year 2 consolidated balance sheet?
On January 1, year 2, ABC Company exchanged 150,000 shares of its P20 par value common stock for all of XYZ's net assets. Both corporations continued to operate as separate businesses, maintaining accounting records with years ending December 31. ABC uses the equity method to account for its investment in XYZ. Information from separate company operations follows: Retained earnings-12/31/Y1 (ABC) P3,200,00 and (XYZ) P925,000; Net income - six months ended 6/30/Y2 (ABC) P800,000 and (XYZ) P275,00O; Dividends paid-3/25/Y2 by ABC was P750,000. What amount of retained earnings would ABC reports in its June 30, year 2 consolidated balance sheet? * Your answer
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