# Consolidation Accounting: Foxx Corporation and Greenburg Company ## Req A: December 31, 4 Consolidated Balances ###1. **Depreciation Expense** **Calculate excess depreciation (from undervalued equipment):** - Equipment undervalued by: $86,500 - Remaining life: 10 years - Annual excess depreciation: $86,500 / 10 = $8,650 **Total consolidated depreciation expense:** - Foxx: $304,000 - Greenburg: $414,000 - Plus excess: $8,650 **Total:** $304,000 + $414,000 + $8,650 = **$726,650** --- ### 2. **Dividends Declared** Dividends declared by Foxx are included, but Greenburg's dividends are eliminated in consolidation. - Foxx: $120,000 - Greenburg: $20,000 (eliminated) **Total:** **$120,000** --- ### 3. **Revenues** - Foxx: $1,140,000 - Greenburg: $968,000 **Total:** $1,140,000 + $968,000 = **$2,108,000** --- ### 4. **Equipment (net)** **Remove Foxx’s investment, add Greenburg’s fair value:** - Foxx: $922,000 - Greenburg: $748,000 (book value at 12/31/24) - Add remaining allocation from initial undervaluation (see below). **Step 1: Calculate accumulated excess depreciation (2022-2024):** - 2022: $8,650 - 2023: $8,650 - 2024: $8,650 - Total: $25,950 **Step 2: Excess value remaining at 12/31/24:** - Initial excess: $86,500 - Less accumulated excess depreciation: $25,950 - Remaining excess: $60,550 **Total consolidated equipment:** $922,000 (Foxx) + $748,000 (Greenburg) + $60,550 (unamortized excess) = **$1,730,550** --- ### 5. **Buildings (net)** - Foxx: $970,000 - Greenburg: $494,000 **No adjustments needed.** **Total:** $970,000 + $494,000 = **$1,464,000** --- ### 6. **Goodwill** **Purchase price:** $863,000 **Greenburg’s book net assets:** $701,000 **Plus undervalued equipment:** $86,500 **Fair value of net assets:** $701,000 + $86,500 = $787,500 **Goodwill:** $863,000 − $787,500 = **$75,500** --- ### 7. **Common Stock** **Only the parent’s (Foxx’s) common stock is reported in consolidation:** **Total:** **$900,000** --- ## Req B: Effect of Parent’s Accounting Method (Initial Value, Partial Equity, Equity) **The parent’s choice of accounting method for its investment in the subsidiary does NOT affect the consolidated balances for the accounts listed in Req A.** This is because, during consolidation, all investment-related accounts (Investment in Subsidiary, Investment Income, etc.) and subsidiary equity accounts are eliminated, and the consolidated financial statements reflect the financial position and performance of the combined entity as if it were a single company. --- ## Req C: Parent's Actual Method **The parent is using the initial value method for its internal reporting purposes.** **Evidence:** - Foxx’s Investment Income is shown as $20,000, which matches Greenburg’s 2024 dividend (not the subsidiary’s net income or adjusted income). This is characteristic of the initial value method. --- ## Req D: Investment Income under Each Method (2024) - **Initial Value Method:** Investment income = Dividends received from Greenburg = **$20,000** - **Partial Equity Method:** Investment income = Greenburg’s reported net income = **$312,000** - **Equity Method:** Investment income = Greenburg’s net income − excess depreciation $312,000 − $8,650 = **$303,350** --- ## Req E: Foxx’s Retained Earnings as of January 1, 2024 **First, calculate balances under each method.** ### **Step 1: Initial Value Method** Under the initial value method, Foxx’s retained earnings only includes its own earnings, not adjusted for subsidiary income or amortization. - Balance as given: **$1,288,000** --- ### **Step 2: Partial Equity Method** **Add Greenburg’s reported net income for 2022 & 2023, subtract dividends:** - 2022: Net income = $136,000; Dividends = $20,000 - 2023: Net income = $103,500; Dividends = $20,000 - Total increase: ($136,000 + $103,500) − ($20,000 + $20,000) = $199,500 **Partial equity method retained earnings:** $1,288,000 + $199,500 = **$1,487,500** --- ### **Step 3: Equity Method** **Add subsidiary's adjusted income (subtracting excess depreciation):** - 2022: $136,000 − $8,650 = $127,350 - 2023: $103,500 − $8,650 = $94,850 - Total: $127,350 + $94,850 = $222,200 - Subtract dividends: $20,000 + $20,000 = $40,000 **Equity method retained earnings:** $1,288,000 + $222,200 = $1,510,200 --- ## **Summary Table** | Account | Consolidated Balance ($) | |------------------------|-------------------------| | Depreciation Expense | 726,650 | | Dividends Declared | 120,000 | | Revenues | 2,108,000 | | Equipment (net) | 1,730,550 | | Buildings (net) | 1,464,000 | | Goodwill | 75,500 | | Common Stock | 900,000 | | Method | Investment Income 2024 | Foxx Retained Earnings 1/1/24 | |-----------------------|-----------------------|-------------------------------| | Initial Value | 20,000 | 1,288,000 | | Partial Equity | 312,000 | 1,487,500 | | Equity | 303,350 | 1,510,200 | --- ## **Notes** - All amounts are positive values. - All eliminations and adjustments follow standard consolidation procedures. - The parent uses the initial value method based on investment income recorded as dividends received. --- **If you need supporting calculations for other accounts or further detail, please specify.**