Keller Jewelers purchased 3,000,000 of the outstanding 10,000,000 shares of Angel & Associates. At the time of the acquisition, the book value of Angel's net assets equals their fair market value. Angel declared Net Income of $2,250,000 for the year. How will Angel's Net Income impact Keller's books?

Question

Quizplus · Accepted Answer

Keller owns 30% of Angel & Associates (3,000,000 out of 10,000,000 shares), so they will recognize 30% of Angel's Net Income, which is $675,000, as an increase in the Investment account and Income from the Investment.

Keller Jewelers Purchased 3,000,000 of the Outstanding 10,000,000 Shares of Angel