P $2-1$

Computations for a midyear purchase $($investee has an extraordinary gain$)$

Rit Corporation paid $$1,372,000$ for a $30$ percent interest in Tel Corporation$$s outstanding voting stock on

April $1,2011.$ At December $31,2010,$ Tel had net assets of $$4,000,000$ and only common stock outstanding.

During $2011,$ Tel declared and paid dividends of $$80,000$ each quarter on March $15,$ June $15,$ September $15,$

and December $15($$$320,000$ in total$).$ At April $1,2011,$ the book value of assets and liabilities equals the fair

value. Tel$$s $2011$ income was reported as follows:

Income before extraordinary item $$480,000$

Extraordinary gain, December $2011160,000$

Net income $$640,000$

REQUIRED: Determine the following items for Rit:

$1.$ Goodwill from the investment in Tel

$2.$ Income from Tel for $2011$

$3.$ Investment in Tel account balance at December $31,2011$

$4.$ Rit$$s equity in Tel$$s net assets at December $31,2011$

$5.$ The amount of extraordinary gain that Rit will show on its $2011$ income st