balance sheet amounts under alternative accounting theories parsons corporation purc 733377
Balance Sheet Amounts under Alternative Accounting Theories
Parsons Corporation purchased 75 percent ownership of Tumble Company on December 31, 20X7, for $210,000. Summarized balance sheet amounts for the companies on December 31, 20X7, prior to the purchase, were as follows:
|
Parsons |
Tumble Company |
|||
|
|
Corporation |
Book Value |
Fair Value |
|
|
Cash & Inventory |
$300,000 |
$ 80,000 |
$ 80,000 |
|
|
Buildings & Equipment (net) |
400,000 |
120,000 |
180,000 |
|
|
Total Assets |
$700,000 |
$200,000 |
$260,000 |
|
|
Common Stock |
$380,000 |
$ 90,000 |
|
|
|
Retained Earnings |
320,000 |
110,000 |
|
|
|
Total Liabilities & Stockholders’ Equity |
$700,000 |
$200,000 |
|
|
Required
If consolidated financial statements are prepared, determine the amounts that would be reported as cash and inventory, buildings and equipment (net), and goodwill using the following consolidation alternatives:
a. Proprietary theory.
b. Parent company theory.
c. Entity theory.
d. Current accounting practice.