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What amount would Power report as Profit for the year (total) in its consolidated I/S for 20X10?

What amount would Power report as Profit for the year (total) in its consolidated I/S for 20X10?

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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On January 1, 20X5, Power Company purchases 80% of the outstanding shares of the Spencer Company for $2,500,000 in cash. On that date, Spencer Company had No Par Common Stock of $2,000,000 and Retained Earnings of $1,000,000. On January 1, 20X5, all of Spencer's identifiable assets and liabilities had fair values that were equal to their carrying values except for: • A building that had an estimated FV of $600,000 less that its carrying value; its remaining useful life was estimated to be 10 years; and • A long-term liability with a FV of $500,000 less than its carrying value; the liability matures on December 31, 20X12. Continue the case of Power Company in the 20X10. Assume that there are no intercompany transactions, no dividends, and no Goodwill impairment since acquisition. Profits for 20X10 were S1,000,000 (Power) and $950,000 (Spencer). The balance of RE as of December 31, 20X10 was S3,000,000 (Power) and S2,600,000 (Spencer). What amount would Power report as Profit for the year (total) in its consolidated I/S for 20X10? $1,950,000 None of these answers $1,935,000 $1,947,500 $1,952,500
Transcribed Image Text:On January 1, 20X5, Power Company purchases 80% of the outstanding shares of the Spencer Company for $2,500,000 in cash. On that date, Spencer Company had No Par Common Stock of $2,000,000 and Retained Earnings of $1,000,000. On January 1, 20X5, all of Spencer's identifiable assets and liabilities had fair values that were equal to their carrying values except for: • A building that had an estimated FV of $600,000 less that its carrying value; its remaining useful life was estimated to be 10 years; and • A long-term liability with a FV of $500,000 less than its carrying value; the liability matures on December 31, 20X12. Continue the case of Power Company in the 20X10. Assume that there are no intercompany transactions, no dividends, and no Goodwill impairment since acquisition. Profits for 20X10 were S1,000,000 (Power) and $950,000 (Spencer). The balance of RE as of December 31, 20X10 was S3,000,000 (Power) and S2,600,000 (Spencer). What amount would Power report as Profit for the year (total) in its consolidated I/S for 20X10? $1,950,000 None of these answers $1,935,000 $1,947,500 $1,952,500
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