On January 1, 2010 Cale Corp. paid $1,020,000 to acquire 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 stockholder’s equity accounts:

Kaltop earned net income for 2010 of $126,000 and paid dividends of $48,000 during the year.

1. The 2010 total amortization of allocations is calculated to be?

a)            $4,000

b)            $6,400

c)            ($2,400)

d)            ($1,000)

e)            $3,800

2. In Cale’s accounting records, what amount would appear on December 31, 2010 for equity in subsidiary earnings?

a)            $77,000

b)            $79,000

c)            $125,000

d)            $127,000

e)            $81,800

3. What is the balance in Cale’s Investment in subsidiary account at the end of 2010?

a)            $1,099,000

b)            $1,020,000

c)            $1,096,200

d)            $1,098,000

e)            $1,144,400

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Fair Book Value Value $120,000 192,000 268,000 516,000 24,000 Current assets $120,000 72,000 240,000 Land Building (twenty year life) Equipment (ten year life) Current liabilities 540,000 24,000 Long-term liabilities Common stock 120,000 228,000 384,000 120,000 Additional paid-in capital Retained earnings 216,000