Perfect Corporation acquired 70 percent of Storm Company's shares on December 31, 20X8, for $140,000. At that date, the fair value of the noncontrolling interest was $60,000. On January 1, 20X0, Perfect acquired an additional 10 percent of Storm's common stock for $32,500. Summarized balance sheets for Storm on the dates indicated are as follows: Dec 31 20X820X920X0Cash$25,000 35,000 50,000 Accounts Receivable 30,000 45,000 80,000 Inventory 45,000 60,000 70,000 Buildings and Equipment (net) 200,000 180,000 160,000 Total Assets$300,000 $320,000 $360,000 Accounts Payable $40,000 35,000 40,000 Notes Payable 60,000 60,000 60,000 Common Stock 100,000 100,000 100,000 Retained Earnings 100,000 125,000 160,000 Total Liabilities

Question

and Equities$300,000 $320,000 $360,000 Storm paid dividends of $10,000 in each of the three years. Perfect uses the fully adjusted equity method in accounting for its investment in Storm and amortizes all differentials over 5 years against the related investment income. All differentials are assigned to patents in the consolidated financial statements.Based on the preceding information, Storm Company's net income for 20X9 and 20X0 are:

A. $35,000 and $45,000 respectively.
B. $25,000 and $35,000 respectively.
C. $25,000 and $45,000 respectively.
D. $10,000 and $20,000 respectively.

Answer 1

Answer: A