Problem:
On January 1, 2012, Franel Co. acquired all of the common stock of Hurlem Corp. For 2012, Hurlem earned net income of $360,000 and paid dividends of $190,000. Amortization of the patent allocation that was included in the acquisition was $6,000.
Required:
How much difference would there have been in Franel's income with regard to the effect of the investment, between using the equity method or using the initial value method of internal recordkeeping?
- $190,000.
- $360,000.
- $164,000.
- $354,000.
- $150,000.
Note: Please show the work not just the answer.