The Financial Statements of Plax Inc Retained Earnings Statements Balance Sheets

question 5

Essay

The financial statements of Plax Inc. and Slate Corp for the year ended December 31, 2018 are shown below:
Income Statements $\begin{array}{|l|l|l|} \hline& \text { Plax Inc. } & \text { Slate Corm } \\\hline \text { Miscellaneous Revenues } & \$ 1,300,000 & \$ 400,000 \\\hline \text { Interest Revenues } & \$ 11,250 &- \\\hline \text { Dividend Revenue } & \$ 15,000 & -\\\hline \text { Less: Expenses } & & \\\hline \text { Miscellaneous Expense } & \$ 864,000 & \$ 259,200 \\\hline \text { Interest Expense } & & \$ 19,400 \\\hline \text { Income Tax Expense } & \$ 198,000 & \$ 48,000 \\\hline \text { Net Income } & \$ 264,250 & \$ 73,400 \\\hline\end{array}$ Retained Earnings Statements
$\begin{array}{|l|l|l|}\hline & \text { Plax Inc. } & \text { Slate Com } \\\hline \text { Balance, J anuary 1, 2018 } & \$ 490,000 & \$ 180,000 \\\hline \text { Net Income } & \$ 264,250 & \$ 73,400 \\\hline \text { Less: Div idends } & \$(126,000) & (\$ 20,000) \\\hline \text { Retained Earnings } & \$ 628,250 & \$ 233,400 \\\hline & & \\\hline\end{array}$ Balance Sheets
$\begin{array}{l|l|l|} \hline& \text { Plax Inc. } & \text { State Corp } \\\hline \text { Miscellaneous Assets } & \$ 1,210,000 & \$ 745,200 \\\hline \text { Investment in Slate Shares } & \$ 196,000 & -\\\hline \text { Investment in Slate Bonds } & \$ 122,250 &- \\\hline \text { Total Assets } & \$ 1,528,250 & \$ 745,200 \\\hline\\\hline \text { Miscellaneous Liabilities } & \$ 600,000 & \$ 150,000 \\\hline \text { Bonds Pay able } &- & \$ 200,000 \\\hline \text { Bond Premium } &- & \$ 1,800 \\\hline \text { Common Shares } & \$ 300,000 & \$ 160,000 \\\hline \text { Retained Earnings } & \$ 628,250 & \$ 233,400 \\\hline \text { Total Liabilities and Equity } & \$ 1,528,250 & \$ 745,200 \\\hline\end{array}$ Other Information:
> Plax acquired 75% of Slate on January 1, 2014 for $196,000, when Slate's retained earnings was $80,000 and the acquisition differential was attributable entirely to goodwill. There were impairment losses to the goodwill of $6,400 and $1,600 in 2015 and 2018 respectively.
> Plax uses the cost method to account for its investment.
> Slate has 10% par value bonds outstanding in the amount of $200,000 which mature on December 31, 2021. The bonds were issued at a premium. On January 1, 2018 the unamortized premium amounted to $2,400 Slate uses the straight line method to amortize the premium.
> On January 1, 2018, Plax acquired $120,000 face value of Slate's bonds for $123,000 Plax also uses the straight line method to amortize any bond premium or discount.
> Both companies are subject to a 40% tax rate.
> Gains and losses from intercompany bond holdings are to be allocated to the two companies when consolidated financial statements are prepared.
-Assuming that Plax uses the equity method, prepare a computation showing the balance in Plax's investment in Slate account on December 31, 2018.

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Definitions:

Non-Strategic

Decisions or actions taken without consideration of the competitive context or longer-term objectives.

Sequential Labor Negotiation

A process where labor negotiations or discussions are conducted in a series or sequence, typically one after another.

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A decision-making approach where a company decides on and adheres to a specific course of action, even in the face of changing circumstances.

Disagreement Value

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