Question

Pardo Corporation paid $140,000 for a 70% interest in Spedeal Inc. on January 1, 2011, when Spedeal had Capital Stock of $50,000 and Retained Earnings of $100,000. Fair values of identifiable net assets were the same as recorded book values. During 2011, Spedeal had income of $40,000, declared dividends of $15,000, and paid $10,000 of dividends. On December 31, 2011, the consolidated financial statements will show

A) investment in Spedeal account of $170,000.

B) investment in Spedeal account of $165,000.

C) consolidated goodwill of $50,000.

D) consolidated dividends receivable of $5,000.

Answer

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