REFERENCE: Ref.06_14 Thomas Inc.had the Following Stockholders' Equity Accounts as of January

question 75

Essay

REFERENCE: Ref.06_14
Thomas Inc.had the following stockholders' equity accounts as of January 1,2009: Kuried Co.acquired all of the voting common stock of Thomas on January 1,2009,for $20,656,000.The preferred stock remained in the hands of outside parties and had a fair value of $3,060,000.A database valued at $656,000 was recognized and amortized over five years.
During 2009,Thomas reported earning $630,000 in net income and paid $504,000 in total cash dividends.Kuried decided used the equity method to account for this investment.
-What was Kuried's balance in the Investment in Thomas Inc.account as of December 31,2009?

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Definitions:

Diseconomies of Scale

A condition in which a firm’s average costs increase as production increases.

Returns to Scale

The change in output as a result of proportionately changing all inputs in the production process, indicating increasing, constant, or decreasing returns.

Marginal Cost

An uplift in the sum total of costs incurred by producing another unit of a product or service.

Average Fixed Cost

The fixed costs of production (such as rent and salaries) divided by the number of goods produced; it decreases as output increases.