Question
On January 1, 2018, Deuce Inc. acquired 15% of Wiz Co.s outstanding common stock for $62,400 and did not exercise significant influence. Wiz earned net
On January 1, 2018, Deuce Inc. acquired 15% of Wiz Co.s outstanding common stock for $62,400 and did not exercise significant influence. Wiz earned net income of $96,000 in 2018 and paid dividends of $36,000. The fair value of Deuces investment was $80,000 at December 31, 2018. On January 3, 2019, Deuce bought an additional 10% of Wiz for $54,000. This second purchase gave Deuce the ability to significantly influence the decision making of Wiz. During 2019, Wiz earned $120,000 and paid $48,000 in dividends. As of December 31, 2019, Wiz reported a net book value of $468,000. At the date of the second purchase, Deuce concluded that Wiz Co.s book values approximated fair values and attributed any excess cost to goodwill.
What amount of equity income should Deuce have reported for 2019?
A. | $38,340 | |
B. | $16,420 | |
C. | $18,000 | |
D. | $30,000 |
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started