The following balances were taken from the records of Cullumber Company: Common stock (1/1/20 and 12/31/20) Retained earnings 1/1/20 Net income for 2023 Dividends declared in 2023 Retained earnings, 12/31/20 Total stockholders' equity on 12/31/20 (a) 1. 2. 1. Pharoah Company purchased 75% of Cullumber Company's common stock on January 1, 2021 for $902,400. The difference between implied value and book value is attributable to assets with a remaining useful life on January 1, 2023 of ten years. 2. Parent company theory. Economic unit theory. Compute the difference between cost/(implied) and book value applying: Parent company theory Economic unit theory $160,900 $ 182,600 $ (42,200) $723,900 301,300 Difference $1,025,200

Step 1: Define Implied value of company

Step 2: The calculation of the parent company as per parent company theory and economic unit theory is as -

Solution