Pete Purchased 100% of the Common Stock of the Sanburn

question 29

Short Answer

Pete 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: Using the simple equity method, which of the following amounts are correct?

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Definitions:

Conjunction Fallacy

A logical error where individuals incorrectly believe that specific conditions are more probable than a single general one.

Probabilities

The measure of the likelihood that an event will occur, expressed as a number between 0 and 1, where 0 indicates an impossibility and 1 indicates certainty.

Uncertain Events

Situations or occurrences with an unpredictable outcome due to a lack of information or inherent variability.

Isolated Cases

Instances or occurrences that are distinct from and not representative of the general situation or condition.