Pell Company acquires 80% of Demers Company for $500,000 on January 1, 2022. Demers reported common stock of $300,000 and retained earnings of $210,000 on that date. Equipment was undervalued by $30,000 and buildings were undervalued by $40,000, each having a 10-year remaining life. Any excess consideration transferred over fair value was attributed to goodwill with an indefinite life. Based on an annual review, goodwill has not been impaired. Demers earns income and pays dividends as follows: 2022 2023 2024 Net income $ 100,000 Dividends 40,000 $ 120,000 50,000 $ 130,000 60,000 Assume the equity method is applied. Compute Pell's investment account balance in Demers at December 31, 2024. Multiple Choice O $639,000 $643,200 $763,200

Pell Company acquires 80% of Demers Company for $500,000 on January 1, 2022. Demers reported common stock of $300,000 and retained earnings of $210,000 on that date. Equipment was undervalued by $30,000 and buildings were undervalued by $40,000, each having a 10-year remaining life. Any excess consideration transferred over fair value was attributed to goodwill with an indefinite life. Based on an annual review, goodwill has not been impaired. Demers earns income and pays dividends as follows: 2022 2023 2024 Net income $ 100,000 Dividends 40,000 $ 120,000 50,000 $ 130,000 60,000 Assume the equity method is applied. Compute Pell's investment account balance in Demers at December 31, 2024. Multiple Choice O $639,000 $643,200 $763,200

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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On January 2, 2024, Cole Inc. paid $100,000 for a 30% interest in Johnas Corp. This investee had assets with a book value of $550,000 and liabilities of $300,000. A patent held by Johnas having a book value of $10,000 was actually worth $40,000 with a six-year remaining life. Any goodwill associated with this acquisition is considered to have an indefinite life. In 2024, Johnas reported a net income of $50,000 and paid dividends of $20,000 while in 2025 it reported a net income of $75,000 and dividends of $30,000. Assume Cole has the ability to significantly influence the operations of Johnas. The equity in income of Johnas for 2025, is: O $22,500. O $21,000. O $12,000. O $13,500. $75,000.
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D1. Account
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