Reference no: EM132510180
Question - Plant, Inc., acquires Seed Corporation on January 1, 2017, in exchange for $510,000 cash. Seed's equipment (with a five-year remaining life) is undervalued by 50,000. The fair values of all other assets and liabilities approximate book value. On the date of the acquisition, Plant had common stock of $350,000 and retained earnings of $860,000 and Seed had common stock of $150,000 and retained earnings of $300,000.
In 2017, Seed earns a net income of $55,000 and declares and pays a $5,000 cash dividend. In 2017, Plant reports net income from its own operations (exclusive of any income from Seed) of $125,000 and declares no dividends.
Required - How much adjustment to Plant's January 1, 2018, Retained Earnings account balance is required if Plant accounts for its investment in Seed using the Partial Equity method?
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