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1. On January 1, 2019, a parent company acquired all of the outstanding common stock of its subsidiary for a purchase price of $250,000. On the acquisition date, this purchase price was $100,000 more than the subsidiary's book value of Stockholders' Equity. The AAP was entirely attributable to an unrecorded Patent. The Patent had a remaining useful life of 5 years on the acquisition date. Since the date of acquisition till December 31, 2021 (a three year period), the subsidiary has reported cumulative net income of $400,000 and paid $50,000 of dividends to its parent company.

Compute the balance of the Equity Investment account on the parent's balance sheet as of December 31, 2021.

A. $600,000

B. $540,000

C. $650,000

D. $250,000

2. On January 1, 2018, the investor company issued 18,000 new shares of the investor company's common stock in exchange for 100% of the common stock of the investee company, in a transaction that qualifies as a business combination. On the acquisition date, the investor company's common stock had a traded market value of $42 per share, and the investee company's common stock had a traded market value of $19 per share. The investee companys net book value was $408,000. In its analysis of the investee company, the investor company determined that the fair value of all identifiable assets less the fair value of all liabilities was $744,000. Provide the Investor Company's balance (i.e., on the investor's books, before consolidation) for "Investment in Investee" immediately following the acquisition of the investee's common stock:

A.$669,600

B.$384,000

C.$756,000

D.$40,000

3. On January 1, 2013, an investor purchases 17,000 common shares of an investee at $12 (cash) per share. The shares represent 20% ownership in the investee. The investee shares are not considered "marketable" because they do not trade on an active exchange. On January 1, 2013, the book value of the investee's assets and liabilities equals $900,000 and $200,000, respectively. On that date, the appraised fair values of the investee's identifiable net assets approximated the recorded book values, except for a customer list. On January 1, 2013, the customer list had a recorded book value of $0, an estimated fair value equal to $50,000 and a 5 year remaining useful life. During the year ended December 31, 2013, the investee company reported net income equal to $42,000 and dividends equal to $20,000.

Assume the investor can exert significant influence over the investee. Determine the balance in the "Investment in Investee" account at December 31, 2013.

A.$168,000

B.$206,400

C.$172,400

D.$190,000

4. Investor owns 40% of Investee and applies the equity method. In 2021, Investor sells merchandise costing $210,000 to Investee for $280,000. Investee's ending inventory includes $60,000 purchased from Investor. Which of the following is the correct equity method entry to defer the unrealized gross profit?

A.Equity Income 60,000

Equity Investment 60,000

B.Cost of Goods Sold 60,000

Equity Investment 60,000

C.Equity Income 6,000

Equity Investment 6,000

D.Equity Investment 6,000

Equity Income 6,000

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