On January 1,2009,Company A acquired 80 percent of the common stock and 60 percent of the preferred stock of Company B,for $400,000 and $60,000,respectively.At the time of acquisition,the fair value of the common shares of Company B held by the noncontrolling interest was $100,000.Company B's balance sheet contained the following balances:
For the year ended December 31,2009,Company B reported net income of $100,000 and paid dividends of $40,000.The preferred stock is cumulative and pays an annual dividend of 10 percent.

-Based on the preceding information,what will be the equity method income reported by Company A from its investment in Company B during 2009?

Question

On January 1,2009,Company A acquired 80 percent of the common stock and 60 percent of the preferred stock of Company B,for $400,000 and $60,000,respectively.At the time of acquisition,the fair value of the common shares of Company B held by the noncontrolling interest was $100,000.Company B's balance sheet contained the following balances:
For the year ended December 31,2009,Company B reported net income of $100,000 and paid dividends of $40,000.The preferred stock is cumulative and pays an annual dividend of 10 percent.
 
-Based on the preceding information,what will be the equity method income reported by Company A from its investment in Company B during 2009?

Quizplus · Accepted Answer

The Answer is C

On January 1,2009,Company a Acquired 80 Percent of the Common