Computation of Consolidated Net Income and Retained Earnings

1. 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:

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.

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