On January 1, 20X1, XYZ, Inc. purchased 70% of Set Corporation for $469,000. On that date the book value of the net assets of Set totaled $500,000. Based on the appraisal done at the time of the purchase, all assets and liabilities had book values equal to their fair values except as follows:   Book Value Fair Value Inventory $100,000 $120,000 Land 75,000 85,000 Equipment (useful life 4 years) 125,000 165,000   The remaining excess of cost over book value was allocated to a patent with a 10-year useful life. During 20X1 XYZ reported net income of $200,000 and Set had net income of $100,000. What income from subsidiary did Promo include in its net income if Promo uses the simple equity method? a. $70,000 b. $42,000 c. $38,000 d. $110,000

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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  1. On January 1, 20X1, XYZ, Inc. purchased 70% of Set Corporation for $469,000. On that date the book value of the net assets of Set totaled $500,000. Based on the appraisal done at the time of the purchase, all assets and liabilities had book values equal to their fair values except as follows:

 

Book Value

Fair Value

Inventory

$100,000

$120,000

Land

75,000

85,000

Equipment (useful life 4 years)

125,000

165,000

 

The remaining excess of cost over book value was allocated to a patent with a 10-year useful life. During 20X1 XYZ reported net income of $200,000 and Set had net income of $100,000.

What income from subsidiary did Promo include in its net income if Promo uses the simple equity method?

a.

$70,000

b.

$42,000

c.

$38,000

d.

$110,000

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