Question

UNUwing information for questions (4-1) and (4-2). shares at underlying book value, i.e., paying the same as Iknow Co. Uknow uses the equity method in accounting for its owners inpany acquired 100 percent of Iknow Company's comme the same as Iknow Co.'s book value. counting for its ownership of lknow on its own books. On December 31, 20X9, the trial balances of the two companies a 15000 Item Current assets Depreciable assets Investment in Iknow Co. Other expenses Depreciation expense Dividends declared Accumulated depreciation Current liabilities Long-term debt Common stock Retained earnings Sales Income from Iknow Co. e two companies are as follows: Uknow Co. Iknow Co. Debit Credit Debit Credit 124000 47500 150000 85000 50000 45000 35000 8500 5000 11000 42500 60000 15000 25000 25000 60000 25000 50000 17500 82500 56000 105000 12500 395000 395000 181000 181000 4-1. On the consolidated statement of retained earnings, retained earnings has a beginning balance of 100,000 124,000 154,000 82,500 b. 4-2. On the consolidated statement of retained earnings, dividends declared has a balance of 5.000 6,000 11.000 16,000

What is 4-1 & 4-2?

Answer 1

Under equity method, assets and liabilities of the company are acquired at agreed values. On consolidated balance sheet stockholders equity of acquiring company remains same

Therefore

Answer for 4-1 is d. $82500 i.e. Retained earnings balance of Uknow Co.

Answer for 4-2 is c. $11000, i.e. Dividend declared balance of Uknow Co.