Perry Company purchased 100% of Starling Company on 1/1/20X1. At the date of acquisition, the following differences existed:

Starling had a 20-year loan for $500,000. The fair value of the loan was $540,000.

Starling had an unrecorded Patent with an estimated remaining life of 5 years. The fair value of the patent was $800,000.

Any other differences between book value and fair value were attributable o goodwill.

At 12/31/20X4, Starling still had the loan and patent that existed at the date of acquisition.

 The following balances are on the separate company's records (4 years have passed). Both accounts are normal balances.

                             Perry.          Starling.      Mathematical Total

Patents.              150,000.        -0-              150,000

Loans payable      350,000.     580,000.      930,000

In the year ended 12/31/20X4, Starling reports net income of $820,000 on its separate income statement.

1. On its separate income statement, what will Perry report as equity in income of Starling for the year ended 12/31/20X4?

2. What will be the balance in the Patents account on the consolidated balance sheet at 12/31/20X4?

3. What will be the balance in the Loans payable account on the consolidated balance sheet at 12/31/20X4?

Answer rating: 100% (QA)

To determine the answers to the questions we need to calculate the equity in income of Starling for ... View the full answer