On January 1, 2020, Stream Company acquired 26 percent of the outstanding voting shares of Q-Video, Inc., for $756,000. Q-Video manufactures specialty cables for computer monitors. On that date, Q-Video reported assets and liabilities with book values of $1.8 million and $786,000, respectively. A customer list compiled by Q-Video had an appraised value of $276,000, although it was not recorded on its books. The expected remaining life of the customer list was eight years with straight-line amortization deemed appropriate. Any remaining excess cost was not identifiable with any particular asset and thus was considered goodwill. Q-Video generated net income of $276,000 in 2020 and a net loss of $138,000 in 2021. In each of these two years, Q-Video declared and paid a cash dividend of $12,000 to its stockholders. During 2020, Q-Video sold inventory that had an original cost of $84,000 to Stream for $168,000. Of this balance, $84,000 was resold to outsiders during 2020, and the remainder was sold during 2021. In 2021, Q-Video sold inventory to Stream for $170,000. This inventory had cost only $136,000. Stream resold $108,000 of the inventory during 2021 and the rest during 2022. For 2020 and then for 2021, compute the amount that Stream should report as income from its investment in Q-Video in its external financial statements under the equity method. 2020 Equity incomeselected answer correct of $48,750selected answer incorrect 2021 Equity lossselected answer correct of $40,274selected answer incorrect
On January 1, 2020, Stream Company acquired 26 percent of the outstanding voting shares of Q-Video, Inc., for $756,000. Q-Video manufactures specialty cables for computer monitors. On that date, Q-Video reported assets and liabilities with book values of $1.8 million and $786,000, respectively. A customer list compiled by Q-Video had an appraised value of $276,000, although it was not recorded on its books. The expected remaining life of the customer list was eight years with straight-line amortization deemed appropriate. Any remaining excess cost was not identifiable with any particular asset and thus was considered
Q-Video generated net income of $276,000 in 2020 and a net loss of $138,000 in 2021. In each of these two years, Q-Video declared and paid a cash dividend of $12,000 to its stockholders.
During 2020, Q-Video sold inventory that had an original cost of $84,000 to Stream for $168,000. Of this balance, $84,000 was resold to outsiders during 2020, and the remainder was sold during 2021. In 2021, Q-Video sold inventory to Stream for $170,000. This inventory had cost only $136,000. Stream resold $108,000 of the inventory during 2021 and the rest during 2022.
For 2020 and then for 2021, compute the amount that Stream should report as income from its investment in Q-Video in its external financial statements under the equity method.
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