Assuming the combination occurred prior to 2009 and was accounted for under the purchase method, what amount will be reported for consolidated retained earnings?
A) $1,830,000.
B) $1,350,000.
C) $1,080,000.
D) $1,560,000.
E) $1,535,000.

Question

Quizplus · Accepted Answer

The consolidated retained earnings will include the parent company's retained earnings plus the subsidiary's retained earnings at the date of combination, adjusted for any amortization of fair value adjustments. The information provided does not indicate any fair value adjustments to be made, so we can assume that the subsidiary's retained earnings will be added to the parent company's retained earnings. Thus, consolidated retained earnings will be:
Parent company's retained earnings (as of 12/31/08): $750,000
Subsidiary's retained earnings (as of 12/31/08): $330,000
Consolidated retained earnings: $750,000 + $330,000 = $1,080,000.

Assuming the Combination Occurred Prior to 2009 and Was Accounted