In January 2010, Wilkinson, Inc., acquired 20 percent of the outstanding common stock of Bremm, Inc., for

Question:

In January 2010, Wilkinson, Inc., acquired 20 percent of the outstanding of Bremm, Inc., for $700,000. This investment gave Wilkinson the ability to exercise significant influence over Bremm. Bremm’s assets on that date were recorded at $3,900,000 with liabilities of $900,000. Any excess of cost over book value of the investment was attributed to a patent having a remaining useful life of 10 years.
In 2010, Bremm reported net income of $170,000. In 2011, Bremm reported net income of $210,000. Dividends of $70,000 were paid in each of these two years. What is the equity method balance of Wilkinson’s Investment in Bremm, Inc., at December 31, 2011?
a. $728,000.
b. $748,000.
c. $756,000.
d. $776,000.

Common Stock
Common stock is an equity component that represents the worth of stock owned by the shareholders of the company. The common stock represents the par value of the shares outstanding at a balance sheet date. Public companies can trade their stocks on...