Reference no: EM131216009
On Jan 1, 2015 the Regal company purchased 30% of the outstanding voting stock on the Air Corporation for $ 300,000; the book value of Air's net assets at the date of purchase was $ 900,000. Regal was willing to pay more than the book value of the acquired shares because Air's depreciable assets with a ten-year remaining life were undervalued. Regal uses straight-line depreciation. Dureing 2015, Air reported net income of $ 75,000 and paid dividends of $ 30,000.
1- The income reported by Regal during 2015 pretaining to the Air investment was ( $ 9,000, $ 22,500, $ 31,500, $ 19,500)
2- Regal has elected the fair value option to account for equity method investments. the fair value of the Air investment as of Dec 31, 2015 was $ 295,000. The income reported by Regal during 2015 pertaining to the Air investment was ( $ 9,000, $ 22,500, $ 19,500,$ 4,000)
3- Regal has elected the fair value option to account for equity method investment. The fair value of the Air investment as of Dec 31, 2015 was $ 295,000. the carrying value of the Air investment on Dec 31, 2015 was ( $ 295,000, $ 300,000 $ 310,500, $ 313,500)
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