On January 1 2007,Wheeley Company issued common shares with a par value of $20,000 and a market value of $172,000 in exchange for 40 percent ownership of Twain Company.Balance sheet information reported by Twain on that date is given below:
Twain reported net income of $56,000 and paid dividends of $25,000 during the year.Wheeley uses the equity method of accounting.The estimated economic life of the patents held by Twain is 8 years.The buildings and equipment are expected to last 6 more years on average with zero salvage value.

-Based on the information provided,differential assigned by Wheeley to inventory for the year is:
A)$0
B)$12,000
C)$4,800
D)$22,000

Question

On January 1 2007,Wheeley Company issued common shares with a par value of $20,000 and a market value of $172,000 in exchange for 40 percent ownership of Twain Company.Balance sheet information reported by Twain on that date is given below:
Twain reported net income of $56,000 and paid dividends of $25,000 during the year.Wheeley uses the equity method of accounting.The estimated economic life of the patents held by Twain is 8 years.The buildings and equipment are expected to last 6 more years on average with zero salvage value.
 
-Based on the information provided,differential assigned by Wheeley to inventory for the year is:
A)$0 
B)$12,000 
C)$4,800 
D)$22,000

Quizplus · Accepted Answer

The Answer of On January 1 2007,Wheeley Company issued common shares with a par value of $20,000 and a market value of $172,000 in exchange for 40 percent ownership of Twain Company.Balance sheet information reported by Twain on that date is given below:
Twain reported net income of $56,000 and paid dividends of $25,000 during the year.Wheeley uses the equity method of accounting.The estimated economic life of the patents held by Twain is 8 years.The buildings and equipment are expected to last 6 more years on average with zero salvage value.
 
-Based on the information provided,differential assigned by Wheeley to inventory for the year is:
A)$0 
B)$12,000 
C)$4,800 
D)$22,000

On January 1 2007,Wheeley Company Issued Common Shares with a Par