Use the Following Information to Answer the Question(s)below

question 8

Multiple Choice

Use the following information to answer the question(s) below.
Pascoe Corporation paid $450,000 for a 90% interest in Sarabet Corporation on January 1,2011,when Sarabet's stockholders' equity consisted of $250,000 Common Stock and $50,000 Retained Earnings.The book values and fair values of Sarabet's assets and liabilities were equal when Pascoe acquired its interest.
The separate net incomes (excluding investment income) of Pascoe and Sarabet for 2011 were $600,000 and $100,000,respectively.Dividends declared and paid during 2011 were $250,000 for Pascoe and $50,000 for Sarabet.Pascoe uses the entity theory in consolidating its financial statements with those of Sarabet.
-Pascoe's income from Sarabet under the equity method for 2011 was

• A)$72,000.
• B)$87,500.
• C)$90,000.
• D)$100,000.

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