50.1K

Verified Solution

Link Copied!

Lambda Company acquires 100% of the stock of Rainbow Corporation on January 1, 2020, for $4,900 cash. As of that date Rainbow has the following trial balance:

8. Assume that Lambda uses equity method to keep track of the investment internally. How much equity income (or equity in subsidiary earnings) will Lambda report on its internal accounting records as a result of Rainbows operations in 2021?

______________

9. Assume that Lambda uses equity method to keep track of the investment internally. What balance would Lambdas Investment in Rainbow balance on December 31, 2021 on its internal accounting records?

______________

10. Assume that Lambda uses initial value method to keep track of the investment internally. What would be the amount of debit to Investment in Rainbow account that Lambda would have to record on its December 31, 2021s consolidation entry *C?

______________

Cash Accounts receivable Inventory Buildings (net) (5-year life) Equipment (net) (2-year life) Land Total Assets Accounts payable Long-term liabilities Common stock Additional pald-in capital Retained earnings Total Liabilities and stockholders' equity 800 700 850 1,500 1.200 1.100 6.150 700 1.800 1,200 900 1.550 6.150 Net income and dividends reported by Rainbow for 2020 and 2021 follow 2020 2021 Net Income 160 180 Dividends 40 50 The fair value of Rainbow's net assets that differ from their book values are listed below (Jan 1, 2020) Buildings 1,400 Equipment 1.450 Land 1,300 Any excess of consideration transferred over fair value of net assets acquired is considered goodwill with an indefinite life

Answer & Explanation Solved by verified expert

See Answer