Question
Please answer part A and B. Petra Corporation paid $500,000 for 80% of the outstanding voting common stock of Sizable Corporation on January 2, 2022
Please answer part A and B.
Petra Corporation paid $500,000 for 80% of the outstanding voting common stock of Sizable Corporation on January 2, 2022 when the book value of Sizable's net assets was $460,000. The fair values of Sizable's identifiable net assets were equal to their book values except as indicated below.
Book Value | Fair Value | |
Inventories (sold in 2022) | $80,000 | $112,000 |
Buildings-net (15-year life) | 200,000 | 170,000 |
Note Payable (paid in 2022) | 20,000 | 21,250 |
Requirement:
Sizable reported net income of $75,000 during 2022; dividends of $35,000 were declared and paid during the year.
Part A) Determine Petra's income from Sizable for 2022.
a. 39,000
b. 38,000
c. 37,000
d. 36,000
Part B) Determine the correct balance in the Investment in Sizable account as of December 31, 2022.
a. 500,000
b. 503,000
c. 506,000
d. 509,000
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