On January 1, 2020, Hemingway Co. acquired all of the common stock of Crotec Corp. For 2020, Crotec earned net income of $375,000 and paid dividends of $200,000. Amortization of the patent allocation that was included in the acquisition was $8,000.

How much difference would there have been in Hemingways income with regard to the effect of the investment, between using the equity method or using the initial value method of internal recordkeeping?

Multiple Choice

• $8,000.

• $167,000.

• $175,000.

• $200,000.

• $375,000.