Puffin Industries acquired all of Sunset Coast Digital's stock on January 1, 2014, for $1,750,000 $1,050,000 in excess of book value. At that time, Sunset Coast's inventory (LIFO) was overvalued by $250,000 and its plant assets (10-year life) were overvalued by $500,000. The remaining excess of cost over book value is attributed to undervalued identifiable intangible assets being amortized over 20 years. Sunset Coast depreciates plant assets and amortizes intangibles by the straight-line method. During the next three years, Sunset Coast reported a total net income of $425,000 and paid out 50 percent in dividends. Puffin carries its investment in Sunset Coast using the complete equity method. Sunset Coast's inventory increased each year since it was acquired by Puffin, and Sunset Coast's reported net income for 2016 was $100,000. Compute Puffin's 2016 equity in the net income of Sunset Coast.

Principles of Accounting Volume 1
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Chapter11: Long-term Assets
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Puffin Industries acquired all of Sunset Coast Digital's stock on January 1,
2014, for $1,750,000 $1,050,000 in excess of book value. At that time, Sunset
Coast's inventory (LIFO) was overvalued by $250,000 and its plant assets
(10-year life) were overvalued by $500,000. The remaining excess of cost
over book value is attributed to undervalued identifiable intangible assets
being amortized over 20 years. Sunset Coast depreciates plant assets and
amortizes intangibles by the straight-line method. During the next three
years, Sunset Coast reported a total net income of $425,000 and paid out
50 percent in dividends.
Puffin carries its investment in Sunset Coast using the complete equity
method. Sunset Coast's inventory increased each year since it was acquired
by Puffin, and Sunset Coast's reported net income for 2016 was $100,000.
Compute Puffin's 2016 equity in the net income of Sunset Coast.
Transcribed Image Text:Puffin Industries acquired all of Sunset Coast Digital's stock on January 1, 2014, for $1,750,000 $1,050,000 in excess of book value. At that time, Sunset Coast's inventory (LIFO) was overvalued by $250,000 and its plant assets (10-year life) were overvalued by $500,000. The remaining excess of cost over book value is attributed to undervalued identifiable intangible assets being amortized over 20 years. Sunset Coast depreciates plant assets and amortizes intangibles by the straight-line method. During the next three years, Sunset Coast reported a total net income of $425,000 and paid out 50 percent in dividends. Puffin carries its investment in Sunset Coast using the complete equity method. Sunset Coast's inventory increased each year since it was acquired by Puffin, and Sunset Coast's reported net income for 2016 was $100,000. Compute Puffin's 2016 equity in the net income of Sunset Coast.
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