30. People purchased 100% of the common stock of the Suntan Company on January 1

Question

30. People purchased 100% of the common stock of the Suntan Company on January 1, 20X 1, for $500,000. On that date, the stockholders equity of Suntan Company was $380,000. On the purchase date, inventory of Suntan Company, which was sold during 20X 1, was understated by $20,000. Any remaining excess of cost over book value is attributable to patent with a 20-year life. The reported income and dividends paid by Suntan Company were as follows: Using the sophisticated (full) evilly method, which of the following amounts are correct?

Explanation / Answer

correct option is "C"

Investment income = $ 80,000

Investment account balance = 500000 +80000 -10000 = 570000

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