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On January 1, 2018, Evan Co. purchased all of the common stock of Kristopher Corp. by issuing 15,000 shares of $1 par value common stock.
On January 1, 2018, Evan Co. purchased all of the common stock of Kristopher Corp. by issuing 15,000 shares of $1 par value common stock. Evan's shares had a $20 per share fair value. On that date, Kristopher reported a net book value of $220,000. However, its equipment (with a five-year remaining life) was undervalued by $20,000 in the company's accounting records. Any excess of consideration transferred over fair value of assets and liabilities is assigned to an unrecorded patent to be amortized over ten years. During 2018, Kristopher earned net income of $158,000 and paid dividends of $70,000. Kristopher's net income and dividends for 2019 were $182,000 and $80,000, respectively. Required: Calculate the balance in the investment account on the books of Evan Co. at the end of 2019 under each of the following methods: a. equity method b. partial equity method c. initial value method
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