Question

On january 1, 2012, franel co. Acquired all of the common stock of hurlem corp. For 2012, 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 initial value method of internal recordkeeping?

Answer 1

Answer:

Explanation:

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.

The 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 initial value method of internal recordkeeping is $164,000.