On january 1 year 1 abc corp purchased all of def corps


On January 1, year 1, ABC Corp. purchased all of DEF Corp.'s common stock for $1,000,000. On that date, the fair values of DEF’s assets and liabilities equaled their carrying amounts of $800,000 and $100,000, respectively. During year 1, DEF paid cash dividends of $20,000. Selected information from the separate balance sheets and income statements of ABC and DEF as of December 31, year 1, and for the year then ended follows:

                                                  ABC                           DEF

Balance sheet accounts

Investment in subsidiary        $800,000

Retained earnings             1,000,000           500,000

Total stockholders' equity      3,000,000              1,500,000

Income statement accounts

Operating income                    400,000             300,000

Equity in earnings of ABC       150,000

Net income                             450,000                  150,000

In ABC's December 31, year 1 consolidated balance sheet, what amount should be reported as total retained earnings?

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Financial Accounting: On january 1 year 1 abc corp purchased all of def corps
Reference No:- TGS01000035

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