Question: On January 3 2011 Haskins Corporation acquired 40 percent of
On January 3, 2011, Haskins Corporation acquired 40 percent of the outstanding common stock of Clem Company for $990,000. This acquisition gave Haskins the ability to exercise significant influence over the investee. The book value of the acquired shares was $790,000. Any excess cost over the underlying book value was assigned to a patent that was undervalued on Clem's balance sheet. This patent has a remaining useful life of 10 years. For the year ended December 31, 2011, Clem reported net income of $260,000 and paid cash dividends of $80,000. At December 31, 2011, what should Haskins report as its investment in Clem under the equity method?
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