On January 1, 2007, Rotor Corporation acquired 30 percent of Stator Company's stock for $150,000. On the acquisition date, Stator reported net assets of $450,000 valued at historical cost and $500,000 stated at fair value. The difference was due to the increased value of buildings with a remaining life of 15 years. During 2007 and 2008 Stator reported net income of $25,000 and $15,000 and paid dividends of $10,000 and $12,000, respectively. Rotor uses the equity method.

1. Based on the preceding information, what amount of differential will be amortized annually? A. $0 B. $750 C. $1,000 D. $2,000

*I know the answer is $1000 but if you can please show computations for that answer.

2. Based on the preceding information, what will be the balance in the investment account on Dec 31, 2007? A. $150,000 B. $157,500 C. $154,500 D. $153,500

*I know the answer is $153,000 but if you can please show computations for that answer.

3. Based on the preceding information, what amount of investment income will be reported by Rotor for the year 2007? A. $6,500 B. $7,500 C. $7,000 D. $25,000

*I know the answer is $6,500 but if you can please show computations for that answer.

4. Based on the preceding information, what amount will Rotor report as the balance in the investment account on Dec 31, 2008? A. $150,000 B. $157,500 C. $153,400 D. $153,500

*I know the answer is $153,400 but if you can please show computations for that answer.

5. Based on the preceding information, what amount of investment income will be reported by Rotor for 2008? A. $6,500 B. $7,500 C. $3,500 D. $4,500

*I know the answer is $3,500 but if you can please show computations for that answer.

6. Based on the preceding information, had Rotor Corporation used the cost method, what would have been the balance in the investment account on Dec 31, 2008? A. $150,000 B. $157,500 C. $153,400 D. $153,500

*I know the answer is $150,000 but if you can please show computations for that answer.