Pell Company acquires 80% of Demers Company for $500,000 on January 1, 2019. 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: 2019 2020 2021Net income$100,000 $120,000 $130,000 Dividends 40,000 50,000 60,000 ??Assume the initial value method is applied.?How much does Pell record as Income from Demers for the year ended December 31, 2021?
A. $98,400.
B. $56,000.
C. $97,000.
D. $48,000.
E. $50,400.
Answer: D
You might also like to view...
“The norm of reciprocity . . . often elicits compliance.” What does that statement mean, and how does it relate to interpersonal communication?
What will be an ideal response?
Which type of store carries several product lines across multiple categories?
A) convenience B) department C) specialty D) wholesaler E) category killer
Which of the following statements is false regarding variable costing?
A) Variable overhead is treated as a product cost. B) Variable costing is required for external financial statements prepared in accordance with generally accepted accounting principles (GAAP). C) Fixed manufacturing overhead is treated as a period cost. D) Period costs are expensed as they are incurred.
Assuming that the number of units produced is less than the number of units sold, which of the following statements is true when comparing net operating income using absorption and variable costing?
A) Absorption costing will yield a higher net operating income. B) Variable costing will yield a higher net operating income. C) Net operating income will be the same under both methods. D) The sales price per unit will be less using absorption costing.