On January 1, 2012, Franel Co. acquired all of the common stock of Hurlem Corp. For 2012, Hurlem earned net income of $360,000 and paid dividends of $190,000. Amortization of the patent allocation that was included in the acquisition was $6,000.
How much difference would there have been in Franel's income with regard to the effect of the investment, between using the equity method or using the partial equity method of internal recordkeeping?
A) $170,000.
B) $354,000.
C) $164,000.
D) $6,000.
E) $174,000.

Question

Quizplus · Accepted Answer

Equity Method = $360,000 - $6,000 - $190,000 = $164,000 Added in Consolidation - Partial Equity Method = $360,000 - $190,000 = $170,000 Added in Consolidation $170,000 - $164,000 = $6,000