Question
Q8 Assume an investee has the following financial statement information for the three years ending December 31, 2019: (At December 31) 2019 2018 2017 Current
Q8
Assume an investee has the following financial statement information for the three years ending December 31, 2019:
(At December 31) | 2019 | 2018 | 2017 |
---|---|---|---|
Current assets | $285,000 | $277,500 | $207,000 |
Tangible fixed assets | 662,500 | 575,000 | 563,000 |
Intangible assets | 40,000 | 75,000 | 50,000 |
Total assets | $987,500 | $897,500 | $820,000 |
Current liabilities | $120,000 | $110,000 | $100,000 |
Noncurrent liabilities | 266,250 | 242,500 | 220,000 |
Common stock | 100,000 | 100,000 | 100,000 |
Additional paid-in capital | 100,000 | 100,000 | 100,000 |
Retained earnings | 400,000 | 345,000 | 300,000 |
Stockholders' equity | 600,000 | 545,000 | 500,000 |
Total liabilities and equity | $986,250 | $897,500 | $820,000 |
(For the years ended December 31) | 2019 | 2018 | 2017 |
---|---|---|---|
Revenues | $970,000 | $920,000 | $850,000 |
Expenses | 875,000 | 840,000 | 775,000 |
Net income | $95,000 | $80,000 | $75,000 |
Dividends | $40,000 | $35,000 | $25,000 |
Assume that on January 1, 2017, an investor company purchased 100% of the outstanding voting common stock of the investee. On the date of the acquisition, the investees identifiable net assets had fair values that approximated their historical book values. In addition, the acquisition resulted in no goodwill or bargain purchase gain recognized in the consolidated financial statements of the investor company. Assuming that the investor company uses the cost method to account for its investment in the investee, what is the balance in the income from investee account in the investor companys pre- consolidation income statement for the year ended December 31, 2019?
$40,000
$95,000
$75,000
$55,000
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