The four Questions relate to the given information:
On January 1, DEF Company purchased all outstanding common shares of UVW Corporation at book value. DEF used the basic equity method to account for its investment in UVW. The investment account is carried at the book value of UVW's net assets and is adjusted for DEF's share of UVW's earnings and dividends. DEF owed UVW $2,000 on account at the end of the year. UVW purchased $8,000 of inventory from DEF during the year. The inventory originally cost DEF $5,000. UVW still holds 50 percent of the inventory at the end of the year.
Question 1: DEF reports net Receivables of $85,000 on its balance sheet at the end of the year, and UVW reports net Receivables of $40,000 on its balance sheet at the end of the year. What is the amount of net Receivables to be reported on the consolidated balance sheet for DEF Company and Subsidiary as of the end of the year?
a. $125,000
b. $85,000
c. $40,000
d. $123,000
e. None of the above
Question 2: DEF reports Short-term Payables of $65,000 and UVW reports Short-term Payables of $10,000 as of the end of the year. What is the amount of Short-term Payables to be reported on the consolidated balance sheet for DEF Company and Subsidiary as of the end of the year?
a. $75,000
b. $65,000
c. $10,000
d. $77,000
e. None of the above
Question 3: DEF reports Retained Earnings of $130,000 as of the end of the year, and UVW reports $90,000. What is the amount of Retained Earnings to be reported on the consolidated balance sheet for DEF Company and Subsidiary as of the end of the year?
a. $128,500
b. $130,000
c. $220,000
d. $218,500
e. None of the Above
Question 4: DEF reports Common Stock of $700,000 on its balance sheet as of the end of the year, and UVW reports Common Stock of $300,000. What is the amount of Common Stock to be reported on the consolidated balance sheet for DEF Company and Subsidiary as of the end of the year?
a. $1,000,000
b. $300,000
c. $700,000
d. $0
e. None of the Above