Figure:
on January 1, 2010, Cale Corp Kaltop Earned Net Income for 2010 of $126,000 and Paid

question 78

Multiple Choice

Figure:
On January 1, 2010, Cale Corp. paid $1,020,000 to acquire Kaltop Co. Kaltop maintained separate incorporation. Cale used the equity method to account for the investment. The following information is available for Kaltop's assets, liabilities, and stockholders' equity accounts: $$\begin{array} { l r r } & \begin{array} { r } \text { Book } \\\text { Value }\end{array} & \begin{array} { r } \text { Fair } \\\text { Value }\end{array} \\\text { Current assets } & \$ 120,000 & \$ 120,000 \\\text { Land } & 72,000 & 192,000 \\\text { Building (twenty year life) } & 240,000 & 268,000 \\\text { Equipment (ten year life) } & 540,000 & 516,000 \\\text { Current liabilities } & 24,000 & 24,000 \\\text { Long-term liabilities } & 120,000 & 120,000 \\\text { Common stock } & 228,000 & \\\text { Additional paid-in capital } & 384,000 & \\\text { Retained earnings } & 216,000 &\end{array}$$ Kaltop earned net income for 2010 of $126,000 and paid dividends of $48,000 during the year.
-What is the balance in Cale's investment in subsidiary account at the end of 2010?

• A) $1,099,000.
• B) $1,020,000.
• C) $1,096,200.
• D) $1,098,000.
• E) $1,144,400.

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Definitions:

Technological Change

A change in the methods, equipment, and software used by a society, improving efficiency, productivity, and quality of life.

Marginal Cost

The additional cost incurred by producing one more unit of a good or service; essential for making efficient production and pricing decisions.

Output

The amount of goods or services produced by a business, industry, or country.

Profit-Maximizing Rule

A principle that firms apply to determine the level of output at which they will realize the maximum possible profits.