The Following Data Applies to Questions 1 - 3

question 48

Multiple Choice

The following data applies to Questions 1 - 3:
On January 1, 20X9, Company A acquired 80 percent of the common stock and 60 percent of the preferred stock of Company B, for $400,000 and $60,000, respectively. At the time of acquisition, the fair value of the common shares of Company B held by the noncontrolling interest was $100,000. Company B's balance sheet contained the following balances:
For the year ended December 31, 20X9, Company B reported net income of $100,000 and paid dividends of $40,000. The preferred stock is cumulative and pays an annual dividend of 10 percent.
-Based on the preceding information,what will be the equity method income reported by Company A from its investment in Company B during 20X9?

• A) $32,000
• B) $30,000
• C) $72,000
• D) $48,000

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Definitions:

Baumrind

A psychologist known for her research on parenting styles, identifying three major approaches: authoritative, authoritarian, and permissive.

Lenient

Exhibiting tolerance or a mild disposition in enforcing strict rules or punishments.

Helicopter Parents

Parents who take an overly protective or excessively interested approach in managing their children's lives, often intruding in matters of education and personal growth.

Compadrazgo

The relationship established between parents and godparents as a form of coparenting.