Question
On January 1, 2012, Dawson, Incorporated, paid $100,000 for a 30% interest in Sacco Corporation. This investee had assets with a book value of $550,000
On January 1, 2012, Dawson, Incorporated, paid $100,000 for a 30% interest in Sacco Corporation. This investee had assets with a book value of $550,000 and liabilities of $300,000. A patent held by Sacco having a book value of $10,000 was actually worth $40,000 with a six year remaining life. Any goodwill associated with this acquisition is considered to have an indefinite life. During 2012, Sacco reported income of $50,000 and paid dividends of $20,000 while in 2013 it reported income of $75,000 and dividends of $30,000. Assume Dawson has the ability to significantly influence the operations of Sacco. The equity in income of Sacco for 2013, is
$22,500.
$21,000.
$12,000.
$13,500.
$75,000.
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