Phips co. purchases 100 percent of sips company on january 1, 20x2, when phips' retained earnings balance is $320,000 and sips' is $120,000. during 20x2, sips reports $20,000 of net income and declares $8,000 of dividends. phips reports $125,000 of separate operating earnings plus $20,000 of equity-method income from its 100 percent interest in sips; phips declares dividends of $35,000. based on the preceding information, what is phips' post-closing retained earnings balance on december 31, 20x2?

Phips' post-closing retained earnings balance on December 31, 20X2 = $577,000

Explanation:

Note: When 100% shares of a company is acquired it is treated as subsidiary and for its accounting equity method is used.

In that case all balances of subsidiary are added to balances of Parent company.

But if any dividend is received then such value is deducted from carrying value of investment, and any share in profit will be added to carrying value.

All the retained earnings balance is accumulated together of both companies.

Therefore closing balance shall be

Retained earnings balance of Sips at year end

= $120,000 + $20,000 - $8,000 = $132,000

Year end balance of Phips Alone

= $320,000 + 125,000 = $445,000

Total Retained Earnings at year end = $132,000 + $445,000 = $577,000

answer; the correct answer should be (demonstrations); good luck

the correct answer is economics is a game without winners or losers.

unlike sports or games economic is a game without losers or winner rather it is a game where everyone wins. parties of business doing businesses exchange money with each other and hence exchange is done on the basis of goods. one party takes the goods and other sales it so there is winner on both sides. each party values more highly the good it gets than the good it gives up. both sides exchange only because both intend to increase their value. so there is no concept of lose or win.