1. On January 3, 2011, Han Company purchases a 15 percent interest in Ben Corporation’s common stock for $50,000 cash. Han accounts for the investment using the cost method. Ben’s net income for 2011 is $20,000, but it declares no dividends. In 2012, Ben’s net income is $80,000, and it declares dividends of $120,000. What is the correct balance of Han’s Investment in Ben account at December 31, 2012?

a. $47,000

b. $50,000

c. $62,000

d. $65,000

2. Sew Corporation’s stockholders’ equity at December 31, 2011, follows (in thousands):

Capital stock, $100 par$3,000

Additional paid-in capital 500

Retained earnings 500

Total stockholders’ equity $4,000

On January 3, 2012, Sew sells 10,000 shares of previously unissued $100 par common stock to Pan Corporation for $1,400,000. On this date the recorded book values of Sew’s assets and liabilities equal their fair values. Goodwill from Pan’s investment in Sew at the date of purchase is:

a. $0

b. $50,000

c. $300,000

d. $400,000

3. On January 1, Leg Company paid $300,000 for a 20 percent interest in Moe Corporation’s voting common stock, at which time Moe’s stockholders’ equity consisted of $600,000 capital stock and $400,000 retained earnings. Leg was not able to exercise any influence over the operations of Moe and accounted for its investment in Moe using the cost method. During the year, Moe had net income of $200,000 and paid dividends of $150,000. The balance of Leg’s Investment in Moe account at December 31 is:

a. $330,000

b. $310,000

c. $307,500

d. $300,000

4. Jot Corporation owns a 40 percent interest in Kaz Products acquired several years ago at book value. Kaz’s income statement contains the following information (in thousands):

Income before extraordinary item $200

Extraordinary loss 50

Net income $150

Jot should report income from Kaz in its income from continuing operations at:

a. $20,000

b. $60,000

c. $80,000

d. $100,000