Question

Sandpiper Inc. acquired a 30% interest in Shore Corporation for $27,000 cash on January 1, 2011, when Shore's stockholders' equity consisted of $30,000 of capital stock and $20,000 of retained earnings. Shore Corporation reported net income of $18,000 for 2011. The allocation of the $12,000 excess of cost over book value acquired on January 1 is shown below, along with information relating to the useful lives of the items:

Overvalued receivables (collected in 2011) $(600)

Undervalued inventories (sold in 2011) 2,400

Undervalued building (6 years' useful life remaining at January 1, 2011) 3,600

Undervalued land 900

Unrecorded patent (8 years' economic life remaining at January 1, 2011) 3,200

Undervalued accounts payable (paid in 2011) (300)

Total of excess allocated to identifiable assets and liabilities 9,200

Goodwill 2,800

Excess cost over book value acquired $12,000

Required:

Determine Sandpiper's investment income from Shore for 2011.

Answer

This answer is hidden. It contains 306 characters.