[CPA!!!]

Question: Pare, Inc., purchased 10% of Tot Co.’s 100,000 outstanding shares of common stock on January 2, 20X1, for $50,000. On December 31, 20X1, Pare purchased an additional 20,000 shares of Tot for $150,000. There was no goodwill as a result of either acquisition, and Tot had not issued any additional stock during 20X1. Tot reported earnings of $300,000 for 20X1. What amount should Pare report in its December 31, 20X1, balance sheet as investment in Tot?

Answers:

A. $170,000

B. $200,000

C. $230,000

D. $290,000

Answer: B:$200

I get how they get to 200. What I don’t understand is why they are not including 10% of the $300K income. I would think the answer would be 50+150,000+(10%*300,000)=$230,000

[CPAHOPE]

One of the requirements to passing FAR is being very attentive to dates. Throughout the whole year, Pare only had acquired 10%, which means it needs to use cost method. Under this method, income does not affect the investment account. Beginning of year 20×2, it would need to use the equity method

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