Question
On January 1, 2017, Paulson Corporation purchased 85% of the outstanding common stock of Sunshine Company, which became a subsidiary of Paulson. No goodwill was
On January 1, 2017, Paulson Corporation purchased 85% of the outstanding common stock of Sunshine Company, which became a subsidiary of Paulson. No goodwill was reported on this acquisition. Differences between book value and fair value of the net identifiable assets of Sunshine Company on January 1, 2017, were limited to the following:
Book value Fair value
Inventories $ 7,800 $ 7,400
Equipment (net) 22,000 25,600
The remaining useful life of the equipment was four years with no salvage value. Sunshine used straight line depreciation. Sunshine reported cost of goods sold (FIFO) of $12,000 and net income of $30,000 in 2017. Paulson uses the complete equity method to account for its investment in Sunshine. On its income statement for 2017, Paulson would report an Equity in Income of Sunshine of
a. $25,075.
$25,500.
$25,925.
$24,395.
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