On January 1, 20X1, Promo, Inc. purchased 70% of Set Corporation for $469,000. On that date the book value of the net assets of Set totaled $500,000. Based on the appraisal done at the time of the purchase, all assets and liabilities had book values equal to their fair values except as follows: The remaining excess of cost over book value was allocated to a patent with a 10-year useful life.
During 20X1 Promo reported net income of $200,000 and Set had net income of $100,000.
What is consolidated net income if Promo recognizes income from Set using the sophisticated equity method?

Question

On January 1, 20X1, Promo, Inc. purchased 70% of Set Corporation for $469,000. On that date the book value of the net assets of Set totaled $500,000. Based on the appraisal done at the time of the purchase, all assets and liabilities had book values equal to their fair values except as follows:  The remaining excess of cost over book value was allocated to a patent with a 10-year useful life.
During 20X1 Promo reported net income of $200,000 and Set had net income of $100,000.
What is consolidated net income if Promo recognizes income from Set using the sophisticated equity method?

Quizplus · Accepted Answer

The Answer is A