Question
A subsidiary is acquired on January 1, 2023 for $10,000. The subsidiarys book value at the date of acquisition was $2,000. Following is revaluation information
A subsidiary is acquired on January 1, 2023 for $10,000. The subsidiarys book value at the date of acquisition was $2,000. Following is revaluation information for the subsidiarys identifiable net assets at the date of acquisition:
Fair Value Book Value | ||
---|---|---|
Inventories | $ 200 | FIFO, sold in 2023 |
Identifiable intangibles | 5,000 | Straight-line, 5 years |
Goodwill recognized in the acquisition was unimpaired in 2023 but became fully impaired during 2024. The subsidiary did not declare any dividends during this period and reported no other comprehensive income. The subsidiary reported net income as follows:
Year | Net Income |
---|---|
2023 | $1,500 |
2024 | 5,000 |
2025 | 2,000 |
The parent uses the complete equity method to report its investment on its own books. Equity in net income for 2023, reported on the parents books, is:
Select one:
a. $1,500
b. $1,300
c. $300
d. $500
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