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Strong Co. acquired all of the outstanding stock of Weak Co. on Jan 1, 2012 for $360,000in cash. Annual excess amortization of $5,000 results from...



Strong Co. acquired all of the outstanding stock of Weak Co. on Jan 1, 2012 for $360,000in cash. Annual excess amortization of $5,000 results from this transaction. On the date of the takeover, Strong reported retained earnings of $100,000 and Weak reported a $50,000 balance Strong reported internal income of $30,000 in 2012 and 35,000 in 2013 and paid $5,000 in dividends each year. Weak reported net income of $15,000 in 2012 and 20,000 in 2013 and paid dividends of $2,000 in each year.

1. Assume that Strong Co.’s internal income figures above do not include any income from Weak Co.

· If the parent uses equity method, what is the amount reported as consolidated Retained Earnings on December 31, 2013



· How the consolidated retained earnings amount will be different if Strong uses either the initial value method or the partial equity method for internal accounting purpose?

2. Using the same data given in Strong and Weak company answer the following.


Under each of the following situations, what is the Investment in Weak account balance on Strong’s books on Jan 1, 2013?

· Strong uses the equity method

· Strong uses the partial equity method

· Strong uses the initial value method

3. Please use the same data of Strong and Weak company and answer the following question.


Under each of the following situations, what is entry *C on 2013 consolidation worksheet?

· Strong uses the equity method

· Strong uses the partial equity method

· Strong uses the initial value method




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