Q 10 Assume an investee has the following financial statement information for the three years ending December 31, 2013: Review of pre-consolidation equity method (controlling investment in affiliate, fair value differs from book value) Assume that on January 1, 2011, an investor company purchased 100% of the outstanding voting common stock of the investee. On the date of the acquisition, the investee's identifiable net assets had fair values that approximated their historical book values, except for tangible fixed assets, which had fair value that was $150,000 higher than the investee's recorded book value. The tangible fixed assets had a remaining useful life of 10 years. In addition, the acquisition resulted in goodwill in the amount of $300,000 recognized in the consolidated financial statements of the investor company. Assuming that the investor company uses the equity method to account for its investment in the investee, what is the balance in the "income from investee" account in the investor company's pre-consolidation income statement for the year ended December 31, 2013? $126,000 $82,500 $67,500 $141,000 (At December 31) 2011 2012 2013 Current assets $310,500 $416,550 $428,205 Tangible fixed assets 844,500 861,450 992,595 Intangible assets 75,000 67,500 60,000 Total assets $1,230,000 $1,345,500 $1,480,800 Current liabilities $150,000 $165,000 $181,500 Noncurrent liabilities 330,000 363,000 399,300 Common stock 150,000 150,000 150,000 Additional paid-in capital 150,000 150,000 150,000 Retained earnings 450,000 517,500 600,000 Total liabilities and equity $1,230,000 $1,345,500 $1,480,800 .

1. Q 10
Assume an investee has the following financial statement information for the three years ending
December 31, 2013:
Review of pre-consolidation equity method (controlling investment in affiliate, fair value
differs from book value)
Assume that on January 1, 2011, an investor company purchased 100% of the outstanding voting
common stock of the investee. On the date of the acquisition, the investee's identifiable net assets
had fair values that approximated their historical book values, except for tangible fixed assets,
which had fair value that was $150,000 higher than the investee's recorded book value. The
tangible fixed assets had a remaining useful life of 10 years. In addition, the acquisition resulted
in goodwill in the amount of $300,000 recognized in the consolidated financial statements of the
investor company. Assuming that the investor company uses the equity method to account for its
investment in the investee, what is the balance in the "income from investee" account in the
investor company's pre-consolidation income statement for the year ended December 31, 2013?
$126,000
$82,500
$67,500
$141,000
(At December 31) 2011 2012 2013
Current assets $310,500 $416,550 $428,205
Tangible fixed assets 844,500 861,450 992,595
Intangible assets 75,000 67,500 60,000
Total assets $1,230,000 $1,345,500 $1,480,800
Current liabilities $150,000 $165,000 $181,500
Noncurrent liabilities 330,000 363,000 399,300
Common stock 150,000 150,000 150,000
Additional paid-in capital 150,000 150,000 150,000
Retained earnings 450,000 517,500 600,000
Total liabilities and equity $1,230,000 $1,345,500 $1,480,800