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Pacific Company bought 35% of the outstanding common stock of Atlantic Inc. on January 1, 2014,...

Question:

Pacific Company bought 35% of the outstanding common stock of Atlantic Inc. on January 1, 2014, for $400,000. Atlantic reported net income of $200,000 for 2014 and declared and paid no dividends for the year. This investment was sold for $500,000 on December 31, 2014.

Pacific should report a gain on sale of this investment on its 2014 income statement of _____.

Investment

Gain or loss from sale of Investment will be closed income statement if the investment is a trading security. Other securities is closed to other comprehensive income.

Answer and Explanation:

Pacific should report a gain on sale of this investment on its 2014 income statement of $30,000

Selling Price 500,000
Value of Investment using equity method 470,000
Gain on sale 30,000


Investment Cost 400,000
Net Income 70,000
Dividends -
Ending Balance 470,000

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