Answer:
The retainesd earnings figure will increase by 464,400 dollars
Explanation:
<em><u>Parent Company premium: </u></em>
Premium: 750,000 / 20 years = 37,500 depreciation per year
unamortized portion at Dec 31th 2013:
amortized: 750,000 - 37,500 x 4 years = 150,000
unarmortized: 750,000 - 150,000 = 600,000
We must reverse 40% of the premium as is within the same company:
600,000 x 40% = 240,000
<u><em>Subsidiary Discount:</em></u>
16,500,000 X 40% = 6,600,000
Purchase at 96.6
Discount of 3.4 = 6,600,000 x 3.4% = 224,400
We must reverse this as is part of the same company.
In total retained earnings will increase by
240,000 + 224,400 = 464,400 dollars
