Question
Heron Corporation acquired 40% of WatersEdge Inc.'s common stock for $400,000 book value on January 1, 2006 when WatersEdge equity consisted of $500,000 capital stock
Heron Corporation acquired 40% of WatersEdge Inc.'s common stock for $400,000 book value on January 1, 2006 when WatersEdge equity consisted of $500,000 capital stock and $500,000 retained earnings. On September 1, 2006 Heron bought an additional 30% interest in WatersEdge for $210,000. In both cases, WaterEdge book value equaled the fair value.
WatersEdge had income of $120,000 earned evenly through 2006 and paid dividends quarterly of $25,000.
The consolidated income statement of Peter Corporation and Subsidiary for the year 2006 should show pre-acquisition income of:
a) $5,333 b) $8,000 c) $32,000 d) $56,000
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