On January 1,2004,Plimsol Company acquired 100 percent of Shipping Corporation's voting shares,at underlying book value.Plimsol uses the cost method in accounting for its investment in Shipping.Shipping's retained earnings was $75,000 on the date of acquisition.On December 31,2004,the trial balance data for the two companies are as follows:

-Based on the information provided,what amount of retained earnings will be reported in the consolidated balance sheet prepared on December 31,2004?
A)$235,000
B)$210,000
C)$310,000
D)$225,000

Question

On January 1,2004,Plimsol Company acquired 100 percent of Shipping Corporation's voting shares,at underlying book value.Plimsol uses the cost method in accounting for its investment in Shipping.Shipping's retained earnings was $75,000 on the date of acquisition.On December 31,2004,the trial balance data for the two companies are as follows:
 
-Based on the information provided,what amount of retained earnings will be reported in the consolidated balance sheet prepared on December 31,2004?
A)$235,000 
B)$210,000 
C)$310,000 
D)$225,000

Quizplus · Accepted Answer

The consolidated retained earnings will be $235,000, which is the sum of the individual retained earnings of the parent company ($125,000) and the subsidiary company ($110,000).

On January 1,2004,Plimsol Company Acquired 100 Percent of Shipping Corporation's