On January 1, 20X8, Ramon Corporation acquired 75 percent of Tester Company's voting common stock for
$300,000. At the time of the combination, Tester reported common stock outstanding of $200,000 and retained
earnings of $150,000, and the fair value of the noncontrolling interest was $100,000. The book value of Tester's
net assets approximated market value except for patents that had a market value of $50,000 more than their
book value. The patents had a remaining economic life of ten years at the date of the business combination.
Tester reported net income of $40,000 and paid dividends of $10,000 during 20X8.
1. Based on the preceding information, what balance will Ramon report as its investment in Tester at December
31, 20X8, assuming Ramon uses the equity method in accounting for its investment?
On January 1, 20X6, Climber Corporation acquired 90 percent of Wisden Corporation for $180,000 cash.
Wisden reported net income of $30,000 and dividends of $10,000 for 20X6, 20X7, and 20X8. On January 1,
20X6, Wisden reported common stock outstanding of $100,000 and retained earnings of $60,000, and the fair
value of the noncontrolling interest was $20,000. It held land with a book value of $30,000 and a market value
of $35,000 and equipment with a book value of $50,000 and a market value of $60,000 at the date of