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Rit Corporation paid $686000 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 $2000000 and only common stock

Rit Corporation paid $686,000 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 $2,000,000 and only common stock outstanding. During 2011, Tel declared and paid dividends of $40,000 each quarter on March 15, June 15, September 15, and December 15 ($160,000 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 .................... $240,000 Extraordinary gain, December 2011 .................... 80,000 Net income .............................................. $320,000 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 statement

Apr 15 2020 View more View Less

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