Poole Company acquires all of the voting stock of Spool Company for $$25,000$ in cash on January $1,201$ and does not retire

it$.$ Poole accounts for its investment using the equity method and Poole and Spool do not do business with one another.

Spool's total stockholders' equity at the date of acquisition was $$20,000.$ The $$5,000$ excess of acquisition cost over book value

includes:

Inventories were undervalued by $$2,000$ and Spool uses FIFO $($Spool sold $50\%$ of this inventory in $201$ and $20\%$ in $20x2)$; PPE was

overvalued by $$4,000(10$ year life remaining$),$ Brand names were not on Spool's books but had value of $$3,000(5$ year life was

identified for these brands$),$ Goodwill $$4,000.$ Poole uses straightline methods for depreciation and amortization.

It is now December $31,20$X$2.$ Spool's net income for $202$ was $$1,700$ and Spool paid $$300$ in dividends to Pool in $20$X$2.$ Spool paid

no dividends in $201$ and Poole's equity in Spool's income for $201$ was $$800.$ Goodwill was impaired by $$500$ during $202.$ Spool's

pre$-$closing trial balance on Dec. $31,20$X$1$ is provided below. Parentheses indicate credit balances.

Q$22-$ Calculate Poole's equity in Spool's net income for $20$X$2.$ Be sure I know whether it's income or loss. For this question, show

your work for partial credit.

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