Problem- 2 On January 1, 2013, American Corporation purchased 25% of the outstanding ordinary shares of...
Problem- 2
On January 1, 2013, American Corporation purchased 25% of the outstanding ordinary shares of Short Supplies for $210,000 cash. On that date, Short's book value and fair value were both $840,000. The equity method is deemed appropriate for this investment. Short's net income reported on December 31, 2013, was $80,000. During 2013, Short also paid cash dividends in the amount of $24,000.
Required:
Compute the amount that would be reported for the investment on American Corporation's financial statements at December 31, 2013.
Homework Answers
Investment in short
original investment $210000
share of net income - 25% of $80,000 = 20,000
less cash dividend 25% of $24,000 (6000)
balance , DEC 31, 2013 224,000
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Problem- 2
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