On January 1, 2010, Cale Corp. paid $1,020,000 to acquire Kaltop Co. Kaltop maintained separate incorporation. Cale used the equity method to account for the investment. The following information is available for Kaltop's assets, liabilities, and stockholders' equity accounts:

Kaltop earned net income for 2010 of $126,000 and paid dividends of $48,000 during the year.
At the end of 2010, the consolidation entry to eliminate Cale's accrual of Kaltop's earnings would include a credit to Investment in Kaltop Co. for

A) $124,400.
B) $126,000.
C) $127,000.
D) $76,400.
E) $0.

Question

On January 1, 2010, Cale Corp. paid $1,020,000 to acquire Kaltop Co. Kaltop maintained separate incorporation. Cale used the equity method to account for the investment. The following information is available for Kaltop's assets, liabilities, and stockholders' equity accounts:

Kaltop earned net income for 2010 of $126,000 and paid dividends of $48,000 during the year.
At the end of 2010, the consolidation entry to eliminate Cale's accrual of Kaltop's earnings would include a credit to Investment in Kaltop Co. for

A) $124,400. 
B) $126,000. 
C) $127,000. 
D) $76,400. 
E) $0.

Quizplus · Accepted Answer

The Answer of On January 1, 2010, Cale Corp. paid $1,020,000 to acquire Kaltop Co. Kaltop maintained separate incorporation. Cale used the equity method to account for the investment. The following information is available for Kaltop's assets, liabilities, and stockholders' equity accounts:

Kaltop earned net income for 2010 of $126,000 and paid dividends of $48,000 during the year.
At the end of 2010, the consolidation entry to eliminate Cale's accrual of Kaltop's earnings would include a credit to Investment in Kaltop Co. for

A) $124,400. 
B) $126,000. 
C) $127,000. 
D) $76,400. 
E) $0.