Acker Inc Bought 40% of Howell Co Howell Reported Net Income of $100,000 in 2012 and $120,000

question 107

Multiple Choice

Acker Inc. bought 40% of Howell Co. on January 1, 2012 for $576,000. The equity method of accounting was used. The book value and fair value of the net assets of Howell on that date were $1,440,000. Acker began supplying inventory to Howell as follows: $\begin{array}{llll}& \text { Cost to } & \text { Transfer } & \text { Amount Held by } \\\text { Year } & \text { Acker } & \text { Price } & \text { Howell at Year-End }\\\hline2012 & \mathbf{\$} 55,000 & \$ 75,000 & \$ 15,000 \\2013 & \$ 70,000 & \$ 110,000 & \$ 55,000\end{array}$ Howell reported net income of $100,000 in 2012 and $120,000 in 2013 while paying $40,000 in dividends each year. What is the balance in Acker's Investment in Howell account at December 31, 2013?

• A)$624,000.
• B)$636,000.
• C)$646,000.
• D)$656,000.
• E)$666,000.

---

Definitions:

Navigate

The ability to plan and direct a route or course, especially by using instruments or maps, or metaphorically in making one's way through complex situations.

Heights

Measurements of vertical dimension or elevation, or the perceived vertical dimension of an object or place.

Visual Cliff

A research tool used to measure infants' perception of depth and their ability to perceive danger in simulated environments.

Depth Perception

The visual ability to perceive the world in three dimensions (3D) and to judge the distance of objects.