Grant, Inc. acquired 30% of South Company's common stock for $350,000 on January 1, 2011. During...

Question:

Grant, Inc. acquired 30% of South Company's common stock for $350,000 on January 1, 2011. During 2011, South Company reported a net income of $120,000 and paid dividends totaling $30,000. For 2012, South Company earned a $160,000 net income and paid dividends totaling $50,000.

On December 31, 2012, Grant, Inc. sold one-half of its investment in South Company for $230,000 cash.

Calculate the balance in the investment in South Company account at December 31, 2011.

Investment

Investment with significance influence is accounted for using equity method. This case, net income increases the balance of investment account.

Answer and Explanation:

The balance of in December 31, 2011 is $356,000


Investment Cost 350,000
Net Income (120,000 * 30%) 36,000
Dividends -30,000
Investment balance, 12/31/2011 356,000
Net Income , 2012 (160,000 * 30%) 48,000
Dividends -50,000
Investment balance, 12/31/2012 354,000

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