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Advanced Accounting - Cale Corp. and Kaltop Co

Use the following information to answer Questions 21 and 22.

On January 1, 2002, Cale Corp. paid $1,020,000 to purchase 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:

Kaltop earned net income for 2003 of $126,000 and paid dividends of $48,000 during the year.

21. In Cale's accounting records, what amount would appear on December 31, 2003 (assuming amortization expense equals $1,600) for Equity in Subsidiary Earnings?
A) $ 0
B) $124,400
C) $126,000
D) $127,000
E) $ 76,400

22. If Cale Corp. had net income of $444,000, exclusive of the investment, what is the amount of Consolidated Net Income?
A) $568,400
B) $570,000
C) $571,600
D) $319,600
E) $444,000

Solution Preview

(21) Since Cale owns 100% of Kaltop, we would have:
Equity in Subsidiary earnings = Net income of ...

Solution Summary

The solution calculates and displays proper values for the accounting statements for Cale Corp. and Kaltop Co.