Question
On January 1, 2014, Kramer Corp. paid $510,000 to acquire Caldwell Co. Kramer used the complete equity method to account for the investment. The following
On January 1, 2014, Kramer Corp. paid $510,000 to acquire Caldwell Co. Kramer used the complete equity method to account for the investment. The following information is available for the assets, liabilities, and stockholders' equity accounts of Caldwell:
Book Value | Fair Value | |
Current assets | $75,000 | $75,000 |
Land | 45,000 | 107,500 |
Building (twenty-five year life) | 150,000 | 167,500 |
Equipment ( ten year life) | 337,500 | 322,500 |
Current liabilities | 15,000 | 15,000 |
Long-term liabilities | 75,000 | 75,000 |
Common stock | 142,500 | |
Additional paid-in capital | 240,000 | |
Retained earnings | 137,500 |
Caldwell earned net income for 2014 of $78,750 and paid dividends of $30,000 during the year.
What is the balance in Equity Investment at the end of 2014?
| A. $559,550 | |
| B. $510,000 | |
| C. $588,750 | |
| D. $589,550 |
On January 1, 2014, Kramer Corp. paid $510,000 to acquire Caldwell Co. Kramer used the complete equity method to account for the investment. The following information is available for the assets, liabilities, and stockholders' equity accounts of Caldwell:
Book Value | Fair Value | |
Current assets | $75,000 | $75,000 |
Land | 45,000 | 107,500 |
Building (twenty-five year life) | 150,000 | 167,500 |
Equipment ( ten year life) | 337,500 | 322,500 |
Current liabilities | 15,000 | 15,000 |
Long-term liabilities | 75,000 | 75,000 |
Common stock | 142,500 | |
Additional paid-in capital | 240,000 | |
Retained earnings | 137,500 |
Caldwell earned net income for 2014 of $78,750 and paid dividends of $30,000 during the year.
If Kramer had applied the partial equity method when recording Equity income, the 2014 consolidation entry to reverse Kramer's recognition of Caldwell's income would include a credit to Equity Investment for:
| A. $80,950 | |
| B. $79,550 | |
| C. $76,550 | |
| D. $78,750 |
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Intermediate Accounting
Authors: Donald E. Kieso, Jerry J. Weygandt, and Terry D. Warfield
15th edition
978-1118159644, 9781118562185, 1118159640, 1118147294, 978-1118147290
