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 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
|Net Income (120,000 * 30%)||36,000|
|Investment balance, 12/31/2011||356,000|
|Net Income , 2012 (160,000 * 30%)||48,000|
|Investment balance, 12/31/2012||354,000|
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from Finance 305: Risk ManagementChapter 3 / Lesson 3