Reference no: EM132485270
Emily Corporation purchased all of Ace Company's common stock on January 1, 2020, for $1,000,000 cash. The investee's stockholders' equity amounted to $400,000. The excess of $600,000 was due to an unrecorded patent with a six-year life. In 2020, Ace reported net income of $250,000 and paid dividends of $25,000.
Question 1: For 2020, what amount of Equity Income will Emily record?
a. $150,000
b. $125,000 $250,000 - 25,000 =
c. $175,000 $225,000
d. $825,000 $1,000,000 + $225,000 =
1,225,000
$1,225,000 - ($600,000/6) =
$1,225,000- (100,000) =
$1,125,000
Question 2: What is the Equity Investment balance at December 31, 2020?
Option a. $ 825,000
Option b. $1,100,000
Option c. $1,125,000
Option d. $1,175,000
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