Question
On January 1, Year 1, Wells, Inc. acquired 30% of the outstanding common stock of Wilton Co. for $1,400,000. This investment gave Wells the ability
On January 1, Year 1, Wells, Inc. acquired 30% of the outstanding common stock of Wilton Co. for $1,400,000. This investment gave Wells the ability to exercise significant influence over Wilton. Wilton's assets on that date were recorded at $6,400,000 with liabilities of $3,000,000. Any excess of cost over book value of Wells' investment was attributed to unrecorded patents having a remaining useful life of ten years. In Year 1, Wilton reported net income of $600,000. For Year 2, Wilton reported net income of $750,000. Dividends of $200,000 were paid in each of these two years. What amount of income will be reported on the income statement for Year 2 as a result of this investment?
A) 329,000
B) 127,000
C) 209,000
D) 187,000
E) 165,000
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