Scenario 3-1
Pedro Purchased 100% of the Common Stock of the Sanburn

question 26

Short Answer

Scenario 3-1
Pedro purchased 100% of the common stock of the Sanburn Company on January 1, 20X1, for $500,000. On that date, the stockholders' equity of Sanburn Company was $380,000. On the purchase date, inventory of Sanburn Company, which was sold during 20X1, was understated by $20,000. Any remaining excess of cost over book value is attributable to patent with a 20-year life. The reported income and dividends paid by Sanburn Company were as follows:
$\begin{array}{lrr} & 20 \mathrm{X} 1 & 20 \mathrm{X} 2 \\\text { Net income } & \$ 80,000 & \$ 90,000 \\\text { Dividends paid } & 10,000 & 10,000\end{array}$
-Refer to Scenario 3-1. Using the simple equity method, which of the following amounts are correct?

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