On January 1, 2010, Franel Co. acquired all of the common stock of Hurlem Corp. For 2010, 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

Under both the equity method and the partial equity method, the amortization of the patent allocation affects Franel's income. The difference in income between the two methods is the amount of the amortization, which is $6,000.