Kermit Korp. acquires 90% of Elmo, Inc. for $450,000 on January 1, 2019. Elmo reported common stock of $275,000 and retained earnings of $190,000 on that date. Equipment was undervalued by $10,000 and buildings were undervalued by $15,000. The equipment and buildings had a remaining useful life of years and 15 years, respectively. Any excess consideration transferred over fair value was attributed to goodwill with an indefinite life. Based on an annual review, goodwill has not been impaired. For the three years below, Elmo reported income and dividends as follows: 2019 2020 2021 Net Income $80,000 $110,000 $125,000 Dividends $25,000 $40,000 $50,000 Part A: Assume the equity method is applied. (1). Compute Kermit's investment in Elmo at December 31, 2020. Select one: a. $557.100 O b. $569,000 C. 5562,500 d. $450,000 e. $575,000 Part A: Assume the equity method is applied. (ii). Compute the non-controlling equity interest in Elmo at December 31, 2020. Select one: a. $57,500 b. $56,900 c. $62,500 d. $61,900 e. $56,400. Part B: Assume the initial value method is applied. (iii). Compute the non-controlling equity interest in Elmo at December 31, 2020, Select one: a. $61,900 b. $56,900 C. $57,500 d. $56,400 e. $62,500 Part B: Assume the initial value method is applied. (iv). Compute Kermit's investment in Elmo at December 31, 2020. Select one: a. $580,000. b. $450,000 c. $574,000 O d. $589,500 e. $584,100 Kermit Korp. acquires 90% of Elmo, Inc. for $450,000 on January 1, 2019. Elmo reported common stock of $275,000 and retained earnings of $190,000 on that date. Equipment was undervalued by $10,000 and buildings were undervalued by $15,000. The equipment and buildings had a remaining useful life of years and 15 years, respectively. Any excess consideration transferred over fair value was attributed to goodwill with an indefinite life. Based on an annual review, goodwill has not been impaired. For the three years below, Elmo reported income and dividends as follows: 2019 2020 2021 Net Income $80,000 $110,000 $125,000 Dividends $25,000 $40,000 $50,000 Part A: Assume the equity method is applied. (1). Compute Kermit's investment in Elmo at December 31, 2020. Select one: a. $557.100 O b. $569,000 C. 5562,500 d. $450,000 e. $575,000 Part A: Assume the equity method is applied. (ii). Compute the non-controlling equity interest in Elmo at December 31, 2020. Select one: a. $57,500 b. $56,900 c. $62,500 d. $61,900 e. $56,400. Part B: Assume the initial value method is applied. (iii). Compute the non-controlling equity interest in Elmo at December 31, 2020, Select one: a. $61,900 b. $56,900 C. $57,500 d. $56,400 e. $62,500 Part B: Assume the initial value method is applied. (iv). Compute Kermit's investment in Elmo at December 31, 2020. Select one: a. $580,000. b. $450,000 c. $574,000 O d. $589,500 e. $584,100
