Fesler Inc

question 102

Essay

Fesler Inc. acquired all of the outstanding common stock of Pickett Company on January 1, 2010. Annual amortization of $22,000 resulted from this transaction. On the date of the acquisition, Fesler reported retained earnings of $520,000 while Pickett reported a $240,000 balance for retained earnings. Fesler reported net income of $100,000 in 2010 and $68,000 in 2011, and paid dividends of $25,000 in dividends each year. Pickett reported net income of $24,000 in 2010 and $36,000 in 2011, 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 equity method, what were the consolidated retained earnings on December 31, 2011?

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Definitions:

Statement of Cashflow

A financial statement that provides aggregate data regarding all cash inflows a company receives from its ongoing operations and external investment sources, as well as all cash outflows that pay for business activities and investments during a given period.

Preferred Shares

A type of stock that provides a fixed dividend and has priority over common stock in the event of a company's liquidation.

Financing Activities

Transactions and events where a business raises funds from debt and equity sources, reflected in the cash flow statement.

Issue for Cash

The process of a company issuing its shares to investors in exchange for cash as a method of raising capital.