On 1/1/15, Parent Co. acquired 100% of the common stock of Sub Co. For 2015, Sub earned net income of $400,000 and paid dividends of $250,000. Amortization of the patent allocation that was included in the acquisition was $9,000. How much difference would there have been in Parent's income with regard to the effect of the investment, between the equity method and the initial value method of internal recordkeeping? Would the following be correct? Equity Method: $400,000-$250,000-$9,000=$141,000 Initial Value Method: $400,000
On 1/1/15, Parent Co. acquired 100% of the common stock of Sub Co. For 2015, Sub earned net income of $400,000 and paid dividends of $250,000. Amortization of the patent allocation that was included in the acquisition was $9,000. How much difference would there have been in Parent's income with regard to the effect of the investment, between the equity method and the initial value method of internal recordkeeping? Would the following be correct? Equity Method: $400,000-$250,000-$9,000=$141,000 Initial Value Method: $400,000
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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On 1/1/15, Parent Co. acquired 100% of the common stock of Sub Co. For 2015, Sub earned net income of $400,000 and paid dividends of $250,000. Amortization of the patent allocation that was included in the acquisition was $9,000. How much difference would there have been in Parent's income with regard to the effect of the investment, between the equity method and the initial value method of internal recordkeeping?
Would the following be correct?
Equity Method: $400,000-$250,000-$9,000=$141,000
Initial Value Method: $400,000
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