1. On January 1, 2020, Archer, Incorporated, paid $100,000 for a 30% interest in Harley Corporation. This investee had a

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1. On January 1, 2020, Archer, Incorporated, paid $100,000 for a30% interest in Harley Corporation. This investee had assets with abook value of $550,000 and liabilities of $300,000. A patent heldby Harley having a book value of $10,000 was actually worth $40,000with a six-year remaining life. Any goodwill associated with thisacquisition is considered to have an indefinite life. During 2020,Harley reported net income of $50,000 and paid dividends of $20,000while in 2021 it reported net income of $75,000 and dividends of$30,000. Assume Archer has the ability to significantly influencethe operations of Harley. The amount allocated to goodwill atJanuary 1, 2020, is
$16,000.
$13,000.
$10,000.
$9,000.
$25,000.
2. A necessary condition to use the equity method ofreporting for an equity investment is that the investor companymust
Multiple Choice
own at least 30% of the investee's voting stock.
have the ability to exercise significant influence over theoperating and financial policies of the investee.
not have the ability to exercise significant influence over theoperating and financial policies of the investee.
possess a controlling interest in the investee's votingstock.
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