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Compute consolidated net income for 2003

5. On January 1, 2002, Park Corporation purchased 70 percent of the common stock of North Corporation for $1,100,000. At that date, North had $1,150,000 of common stock outstanding and retained earnings of $370,000. Equipment with a remaining life of 5 years had a book value of $560,000 and a fair value of $600,000. North's remaining assets had book values equal to their fair values. The income and dividend figures for both Park and North are as follows:

Income Dividends
Park 2002 $370,000 $100,000
2003 $420,000 $120,000
North 2002 $ 80,000 $ 20,000
2003 $134,000 $ 30,000

Park's income as shown does not include any income from its investment in North. Park's retained earnings balance at the date of acquisition was $1,402,000.

Required:
A) Compute consolidated net income for 2003.

B) Compute consolidated retained earnings as of December 31, 2003.

Solution Preview

2002:
Consolidated Net income = (370,000 - 100,000) + 0.70*(80,000 - 20,000 - 600,000/5) = 270,000 ...

Solution Summary

The solution computes consolidated net income for 2003 for Park Corporation.

$2.19