REFERENCE: Ref.03_13 Fesler Inc.acquired All of the Outstanding Common Stock of Pickett

question 69

Essay

REFERENCE: Ref.03_13
Fesler Inc.acquired all of the outstanding common stock of Pickett Company on January 1,2009.Annual amortization of $22,000 resulted from this transaction.On the date of the takeover,Fesler reported retained earnings of $520,000 while Pickett reported a $240,000 balance.Fesler reported net income of $100,000 in 2009 and $68,000 in 20010,and paid dividends of $25,000 in dividends each year.Pickett reported net income of $24,000 in 2009 and $36,000 in 2010,and paid dividends of $10,000 in dividends each year.
Assume that Fesler's reported net income includes Equity in Subsidiary Income.
-If the parent's net income reflected use of the partial equity method,what were the consolidated retained earnings on December 31,2010?

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Definitions:

Passive Strategy

A portfolio decision that avoids any direct or indirect security analysis. See passive management.

Index Funds

Investment funds designed to replicate and track the components of a market index.

Sharpe Measure

A financial metric used to measure the performance of an investment compared to its risk, indicating how much excess return you are receiving for the extra volatility endured by holding a riskier asset.

Mean-Variance Analysis

Evaluation of risky prospects based on the expected value and variance of possible outcomes.