Grant, Inc. acquired 40% of South Company\'s common stock for $200,000 on Januar
ID: 2445501 • Letter: G
Question
Grant, Inc. acquired 40% of South Company's common stock for $200,000 on January 1, 2014. In its 2014 cash flow statement, Grant, Inc. reported an operating cash inflow related to its investment in South Company of $6,800. The balance in the investment in South Company account at December 31, 2014 amounted to $226,800. During 2015, South Company reported net income of $91,000. On December 31, 2015, Grant, Inc. sold one-half of its investment in South Company for $137,000 cash which resulted in them reporting a gain on sale of investments of $12,000.
Calculate the amount of net income reported by South Company in 2014. Do not use decimals in your answer.
Explanation / Answer
Ans
Details Amount Sale of 1/2 Investment 1,37,000.00 Gain on sale of investment 12,000.00 Carrying amount of investment 1,25,000.00 Carrying amount of investment before sale=125000/.5 2,50,000.00 Note: Carrying amount differes from the acquisition cost because of the accounting method employed by the entity If it is Equity method , share of income( Loss) of investee company is adjusted to the cost of investment. If it is not accounted in with equity method , it will be accounted either as held for trading or AFS .Related Questions
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