On January 1, 2012, 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 on January 1, 2012: Kaltop earned net income for 2012 of $126,000 and paid dividends of $48,000 during the year.
In Cale's accounting records, what amount would appear on December 31, 2012 for equity in subsidiary earnings?
A) $77,000.
B) $79,000.
C) $125,000.
D) $127,000.
E) $81,800.

Question

On January 1, 2012, 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 on January 1, 2012:  Kaltop earned net income for 2012 of $126,000 and paid dividends of $48,000 during the year.
In Cale's accounting records, what amount would appear on December 31, 2012 for equity in subsidiary earnings?
A) $77,000. 
B) $79,000. 
C) $125,000. 
D) $127,000. 
E) $81,800.

Quizplus · Accepted Answer

$126,000 + $1,000 = $127,000