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 simple equity method, which of the following amounts are correct? Investment Income Investment Account Balance 20X1 December 31, 20X1 A. $80,000 $570,000B. $70,000 $570,000C. $70,000 $550,000D. $80,000 $550,000
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 simple equity method, which of the following amounts are correct?
Investment Income Investment Account Balance
20X1 December 31, 20X1
A. $80,000 $570,000
B. $70,000 $570,000
C. $70,000 $550,000
D. $80,000 $550,000
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