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On January 2, 2019, Parker Corporation invests in the stock of Quarry Corporation

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On January 2, 2019, Parker Corporation invests in the stock of Quarry Corporation. Quarry's book value is $4 million and its assets and liabilities are reported at amounts approximating fair value. Quarry reports income of $3 million in 2019. Parker's December 31, 2019, balance sheet and 2019 income statement, ignoring its investment in Quarry's stock, follow. Neither company reports other comprehensive income.

 

Parker Corp

Balance Sheet (in thousands)

Dec 31, 2019

 

Current assets $40,000

Property, net $450,000

Identifiable intangibles $5,000

 

Total assets $495,000

 

Current Liabilities $20,000

Long-term liabilities 200,000

Capital Stock 90,000

Retained Earnings 185,000

 

Total Liabilities and equity 495,000

 

 

Parker Corporation

Income Statement (in thousands)

Year ended Dec 31, 2019

 

Sales Revenue $900,000

Cost of sales (750,000)

Operating Expenses (140,000)

Net Income $10,000

 

Quarry Corporation financial statements for 2019 are as follows:

 

Quarry Corporation

Balance Sheet (in thousands)

December 31, 2019

 

Current Assets $5,000

Property, net 85,000

Total Assets $90,000

 

Current Liabilities $2,000

Long-term liabilities 81,000

Capital stock, $1 par 1,000

Retained earnings 6,000

Total liabilities and equity $90,000

 

 

Quarry Corporation

Income Statement (in thousands)

Year ended December 31, 2019

 

Sales Revenue $60,000

Cost of Sales (20,000)

Operating Expenses (37,000)

Net Income $3,000

 

 

 

Required

 

Prepare Parker's December 31, 2019, balance sheet and 2019 income statement under each of the following circumstances:

 

a. Parker's investment consists of 100,000 shares costing $15/share, and Parker classifies it as having no significant influent. The shares have a market value of $12/share on December 31, 2019.

 

b. Parker's investment consists of 400,000 shares costing $15/share, and Parker accounts for it using the equity method. The investment is not impaired at year-end.

 

c. Parker acquires all of Quarry's shares for $15 million in cash, retires the shares and merges with Quarry. Goodwill is unimpaired in 2019.