Dawson incorporated- Equity in income of Sacco for 2011( with explanations)

On January 1 2010, Dawson, incorporated paid$100,000 for 30% interest in Sacco corporation. This investee has assets with a book value of $550,000 and liabilities of $300,000. A patent held by Sacco having a book value of $10,000 was actually worth $40,000 with a six year remaining life. Any goodwill associated with this acquisition is considered to have a indefinite life. During 2010, Sacco reported income of $50,000 and paid dividends 0f $20,000 while in 2011 it reported income of $75,000 and dividends of $30,000. Assume Dawson has the ability to significantly influence the operations of Sacco.

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