On January 1, 2014, Kramer Corp. paid $510,000 to acquire Caldwell Co. Kramer us
ID: 2378392 • Letter: O
Question
On January 1, 2014, Kramer Corp. paid $510,000 to acquire Caldwell Co. Kramer used the complete equity method to account for the investment. The following information is available for the assets, liabilities, and stockholders' equity accounts of Caldwell:
Book Value
Fair Value
Current assets
$75,000
$75,000
Land
45,000
107,500
Building (twenty-five year life)
150,000
167,500
Equipment ( ten year life)
337,500
322,500
Current liabilities
15,000
15,000
Long-term liabilities
75,000
75,000
Common stock
142,500
Additional paid-in capital
240,000
Retained earnings
137,500
Caldwell earned net income for 2014 of $78,750 and paid dividends of $30,000 during the year.
For 2014, what is the balance in Equity Income on Kramer's books?
Book Value
Fair Value
Current assets
$75,000
$75,000
Land
45,000
107,500
Building (twenty-five year life)
150,000
167,500
Equipment ( ten year life)
337,500
322,500
Current liabilities
15,000
15,000
Long-term liabilities
75,000
75,000
Common stock
142,500
Additional paid-in capital
240,000
Retained earnings
137,500
Explanation / Answer
Ans: C
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