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Question(s) / Instruction(s):

                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 Kaltops assets, liabilities, and stockholders equity accounts:

                                                                Book Value                              Fair Value

Current Assets                                             $120,000                               $120,000

Land                                                              72,000                                 192,000

Building (20 yr life)                                         240,000                                268,000

Equipment (10 yr life)                                      540,000                               516,000

Current Liabilities                                              24,000                                 24,000

Long-Term Liabilities                                        120,000                               120,000

Common Stock                                                228,000                

APIC                                                               384,000

Retained Earnings                                             216,000

 

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

At the end of 2010, the consolidation entry to eliminate Cales accrual of Kaltops earnings would include a credit to Investment in Kaltop Co. for

A.            $124,400.

B.            $126,000.

C.            $127,000.

D.            $76,400.

E.            $0.

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