Answer :
Form the statement, Jacob Corporation's share of Gardner Enterprises' net income for the current year is $67,200.
So, the correct answer is $67,200.
To find Jacob Corporation's share of Gardner Enterprises' net income for the current year, we need to go through several steps:
1. Calculate Gardner Enterprises' adjusted book value at the date of acquisition:
- Gardner's reported net assets: $1,414,000
- Undervaluation of plant assets: $118,000
- Adjusted book value: $1,414,000 + $118,000 = $1,532,000
2. Calculate Jacob Corporation's initial investment in Gardner Enterprises:
- Jacob Corporation's payment for a 30% share: $536,200
3. Determine Jacob Corporation's share of Gardner Enterprises' net assets at the date of acquisition:
- Jacob Corporation's share of adjusted book value: 30% * $1,532,000 = $459,600
4. Calculate Gardner Enterprises' net income for the current year:
- Net income reported by Gardner: $224,000
5. Determine Jacob Corporation's share of Gardner Enterprises' net income for the current year:
- Jacob Corporation's share of net income: 30% * $224,000 = $67,200
6. Calculate Jacob Corporation's ending share of Gardner Enterprises' equity:
- Gardner Enterprises' common shares' value: $1,737,667
- Jacob Corporation's share (30%): 30% * $1,737,667 = $521,300
7. Consider dividends declared and paid by Gardner Enterprises:
- Dividends declared and paid: $182,000
To summarize:
- Jacob Corporation's share of Gardner Enterprises' net income for the current year is $67,200.
- Jacob Corporation's ending share of Gardner Enterprises' equity is $521,300.
- Dividends declared and paid by Gardner Enterprises amount to $182,000.
So, the correct answer is $67,200.
