On January 2, 2018, Baltimore Company purchased 16,000 shares of the stock of Towson Company at $12 per share. Baltimore obtained significant influence as the purchase represents a 30% ownership stake in Towson Company. On August 1, 2018, Towson Company paid cash dividends of $21,000. Baltimore Company intended this investment to a long-term investment. On December 31, 2018, Towson Company reported $80,000 of net income for FY 2018. Additionally, the current market price for Towson Company's stock increased to $19 per share at the end of the year. Use this information to determine, how much Baltimore Company should report for its investment in Towson Company on December 31, 2018. (Round to the nearest dollar.)
Solution:
Baltimore Company should report for its investment in Towson Company on December 31, 2018 = Cost of investment + Share in net income of towson company - share in dividend paid by Towson company
= (16000*$12) + ($80,000*30%) - ($21,000*30%)
= $209,700
On January 2, 2018, Baltimore Company purchased 16,000 shares of the stock of Towson Company at...