Pell Company acquires 80% of Demers Company for $500,000 on January 1, 2022. Demers reported common stock of $300,000 and retained earnings of $210,000 on that date. Equipment was undervalued by $30,000 and buildings were undervalued by $40,000, each having a 10-year remaining life. Any excess consideration transferred over fair value was attributed to goodwill with an indefinite life. Based on an annual review, goodwill has not been impaired. Demers earns income and pays dividends as follows: 2022 2023 2024 Net income $ 100,000 Dividends 40,000 $ 120,000 50,000 $ 130,000 60,000 Assume the equity method is applied. Compute Pell's investment account balance in Demers at December 31, 2024. Multiple Choice O $639,000 $643,200 $763,200

Auditing: A Risk Based-Approach (MindTap Course List)
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Chapter12: Auditing Long-lived Assets And Merger And Acquisition Activity
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Pell Company acquires 80% of Demers Company for $500,000 on January 1, 2022. Demers reported common stock of $300,000 and retained earnings of $210,000 on that
date. Equipment was undervalued by $30,000 and buildings were undervalued by $40,000, each having a 10-year remaining life. Any excess consideration transferred over
fair value was attributed to goodwill with an indefinite life. Based on an annual review, goodwill has not been impaired.
Demers earns income and pays dividends as follows:
2022
2023
2024
Net income $ 100,000
Dividends
40,000
$ 120,000
50,000
$ 130,000
60,000
Assume the equity method is applied.
Compute Pell's investment account balance in Demers at December 31, 2024.
Multiple Choice
$639,000
$643.200
$763,200
Transcribed Image Text:Check my we Pell Company acquires 80% of Demers Company for $500,000 on January 1, 2022. Demers reported common stock of $300,000 and retained earnings of $210,000 on that date. Equipment was undervalued by $30,000 and buildings were undervalued by $40,000, each having a 10-year remaining life. Any excess consideration transferred over fair value was attributed to goodwill with an indefinite life. Based on an annual review, goodwill has not been impaired. Demers earns income and pays dividends as follows: 2022 2023 2024 Net income $ 100,000 Dividends 40,000 $ 120,000 50,000 $ 130,000 60,000 Assume the equity method is applied. Compute Pell's investment account balance in Demers at December 31, 2024. Multiple Choice $639,000 $643.200 $763,200
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