On January 1, 2017, Dawson, Incorporated, paid $100,000 for a 30% interest in Sacco Corporation. This investee had assets with a book value of $550,000 and liabilities of $300,000. A patent held by Sacco 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. During 2017, Sacco reported net income of $50,000 and paid dividends of $20,000 while in 2018 it reported net income of $75,000 and dividends of $30,000. Assume Dawson has the ability to significantly influence the operations of Sacco.The equity in income of Sacco for 2017, is:
A. $7,500.
B. $9,000.
C. $50,000.
D. $15,000.
E. $13,500.
Answer: E
You might also like to view...
Which of the following is headed by the secretary-general of the United Nations (UN)?
A) the International Court of Justice B) the Secretariat C) the Security Council D) the General Assembly
A finance lease is a three-party transaction
Indicate whether the statement is true or false
Competition affects companies in all of the following ways EXCEPT ________
A) forcing them to deliver customer satisfaction B) forcing them to improve their products C) forcing them to aggressively promote their brands D) forcing them to lower their prices E) forcing them to increase their production levels
When firms' earnings fluctuate, they tend to adjust their payout policy by ________.
A) allowing dividends to fluctuate while holding share repurchases relatively steady B) allowing share repurchases to fluctuate while holding dividends relatively steady C) adjusted both dividends and share repurchases so the total payout as a percentage of earnings remains relatively steady D) stop paying dividends and repurchasing shares