Kaye Company Acquired 100% of Fiore Company on January 1

question 6

Multiple Choice

Kaye Company acquired 100% of Fiore Company on January 1, 2021. Kaye paid $1,000 excess consideration over book value, which is being amortized at $20 per year. There was no goodwill in the combination. Fiore reported net income of $400 in 2021 and paid dividends of $100.Assume the partial equity method is applied. How much equity income will Kaye report on its internal accounting records as a result of Fiore's operations?

• A) $400
• B) $300
• C) $380
• D) $280
• E) $480

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Definitions:

Ending Inventory

The value of goods available for sale at the end of an accounting period, calculated either by a physical count or accounting estimation methods.

Perpetual Inventory System

An accounting system that continuously updates inventory records for each purchase and sale.

Inventory On September 30

The stock of goods a company has available for sale or used in production as recorded on September 30th.

Inventory Cost Flow Assumptions

Accounting methods assumed about how costs flow through inventory; basic types include FIFO, LIFO, and weighted average.