On July 1, 2005, Parson Corporation Acquired All the Outstanding

Essay

On July 1, 2005, Parson Corporation acquired all the outstanding common stock of Scate Company for $900,000. On that date, the carrying amount of Scate's identifiable net assets was $800,000. The difference of $100,000 was allocated as follows:
Scate had a net income of $190,000 and declared dividends of $100,000 for the fiscal year ended June 30, 2006. Scate uses straight-line depreciation for plant assets. Goodwill was one-thirtieth impaired on June 30, 2006.
Prepare a working paper to compute the following for Parson Corporation under the equity method of accounting (disregard income taxes):
a. Balance of Intercompany Investment Income ledger account on June 30, 2006
b. Balance of Investment in Scate Company Common Stock ledger account on June 30, 2006