Chapter 2 Quiz - Key.rtf - Exam Name 1)Patriot Company...

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Exam Name___________________________________ 1) Patriot Company purchased 90 percent of Eagle Inc. on January 1, 20X9 for $800,000. Eagle reported earnings of $90,000 and declared dividends of $100,000 during 20X9. Based on the preceding information and assuming Patriot uses the cost method to account for its investment in Eagle, what is the balance in Patriot’s Investment in Eagle account on December 31, 20X9, prior to consolidation? (2pts) 800,000+81,000-90,000 = 791,000 2)On January 1, 20X7, Ute Corporation acquired 40 percent of the outstanding shares of Cougar Corporation for $300,000 cash. Cougar Company reported net income of $120,000 and paid dividends of $30,000 for 20X7 and reported net income of $50,000 and paid dividends of $30,000 for 20X8. The fair value of shares held by Ute was $450,000 and $500,000 on December 31, 20X7 and 20X8 respectively. Based on the preceding information, what amount will be reported by Ute as its investment in Cougar for 20X7, if it used the equity method of accounting? (2pts) 300,000+48,000-12,000 = 336,000 Based on the preceding information, what amount will be reported by Ute as its investment in Cougar for 20X8, if it used the equity method of accounting? (2pts)
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