Select the correct answer for each of the following questions.
1. On July 1, 20X3, Barker Company purchased 20 percent of Acme Company€™s outstanding common stock for $400,000 when the fair value of Acme€™s net assets was $2,000,000. Barker does not have the ability to exercise significant influence over Acme€™s operating and financial policies. The following data concerning Acme are available for 20X3:

In its income statement for the year ended December 31, 20X3, how much income should Barker report from this investment?
a. $20,000.
b. $32,000.
c. $38,000.
d. $60,000.
2. On January 1, 20X3, Miller Company purchased 25 percent of Wall Corporation€™s common stock; no differential resulted from the purchase. Miller appropriately uses the equity method for this investment, and the balance in Miller€™s investment account was $190,000 on December 31, 20X3. Wall reported net income of $120,000 for the year ended December 31, 20X3, and paid dividends on its common stock totaling $48,000 during 20X3. How much did Miller pay for its 25 percent interest in Wall?
a. $172,000.
b. $202,000.
c. $208,000.
d. $232,000.
3. On January 1, 20X7, Robohn Company purchased for cash 40 percent of Lowell Company€™s 300,000 shares of voting common stock for $1,800,000 when 40 percent of the underlying equity in Lowell€™s net assets was $1,740,000. The payment in excess of underlying equity was assigned to amortizable assets with a remaining life of six years. As a result of this transaction, Robohn has the ability to exercise significant influence over Lowell€™s operating and financial policies. Lowell€™s net income for the year ended December 31, 20X7, was $600,000. During 20X7, Lowell paid $325,000 in dividends to its shareholders. The income reported by Robohn for its investment in Lowell should be
a. $120,000.
b. $130,000.
c. $230,000.
d. $240,000.
4. In January 20X0, Farley Corporation acquired 20 percent of Davis Company€™s outstanding common stock for $800,000. This investment gave Farley the ability to exercise significant influence over Davis. The book value of the acquired shares was $600,000. The excess of cost over book value was attributed to an identifiable intangible asset, which was undervalued on Davis€™ balance sheet and had a remaining economic life of 10 years. For the year ended December 31, 20X0, Davis reported net income of $180,000 and paid cash dividends of $40,000 on its common stock. What is the proper carrying value of Farley€™s investment in Davis on December 31, 20X0?
a. $772,000.
b. $780,000.
c. $800,000.
d.$808,000.

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Twelve Months Ended December 31, 20X3 $300,000 190,000 Six Months Ended December 31, 20X3 $160,000 100,000 Net income Dividends declared and paid