On July 1, 20X8, Pair Logic Corporation acquires 75 percent of Systems Inc. common stock for its underlying book value. At the time of acquisition, the fair value of the noncontrolling interest is equal to its proportionate share of book value of Systems. On January 1, 20X8 Systems reported common stock of $100,000 and retained earnings of $130,000. For the year 20X8, Systems reports the following items: BeforeCombination(January 1 toJune 30)AfterCombination(July 1 toDecember 31)Sales$150,000 $160,000 Cost of Goods Sold 90,000 93,000 Depreciation Expense 20,000 20,000 Other Expenses 15,000 17,000 Net Income 25,000 30,000 Dividends 15,000 18,000 Pair Logic uses the equity method in accounting for this investment.Based on the preceding information, what journal
entry would Pair Logic make to record equity method income for the year?A)Cash24,750 Investment in Systems 24,750 B)Investment in Systems22,500 Income from Systems 22,500 C)Cash18,000 Investment in Systems 18,000 D)Investment in Systems41,250 Income from Systems 41,250
A. Option A
B. Option B
C. Option C
D. Option D
Answer: B
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