Pete purchased 100% of the common stock of the Sanburn Company on January 1, 20X1, for $500,000. On that date, the stockholders' equity of Sanburn Company was $380,000. On the purchase date, inventory of Sanburn Company, which was sold during 20X1, was understated by $20,000. Any remaining excess of cost over book value is attributable to patent with a 20-year life. The reported income and dividends paid by Sanburn Company were as follows: 20X1 20X2 Net income $80,000 $90,000 Dividends paid 10,000 10,000 Using the cost method, which of the following amounts are correct? Investment Income Investment Account Balance 20X1 December 31, 20X1 a. $10,000 $500,000 b. $10,000 $570,000 c. $0 $570,000 d. $80,000 $500,000
Pete purchased 100% of the common stock of the Sanburn Company on January 1, 20X1, for $500,000. On that date, the
|
|
20X1 |
20X2 |
|
Net income |
$80,000 |
$90,000 |
|
Dividends paid |
10,000 |
10,000 |
Using the cost method, which of the following amounts are correct?
Investment Income Investment Account Balance
20X1 December 31, 20X1
|
a. |
$10,000 $500,000 |
|
b. |
$10,000 $570,000 |
|
c. |
$0 $570,000 |
|
d. |
$80,000 $500,000 |
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