Grant, Inc. acquired 40% of South Company\'s common stock for $200,000 on Januar
ID: 2445553 • 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, the balance in South Company Account at December 31, 2015 immediately before one-half of the investment was sold, and total amount of dividends declared by South Company in 2015.
Explanation / Answer
Calculation of the Net Income Net Income 91000 Add: Gain on sale of investment 12000 Total Net Income 103000 It is assuming that the gain on sale of investment is not included in the Net income of amounting Rs. 91000 Balance Sheet Investments Investment in South Company 220000 Total Amount of dividend declared by the south company = 226800-200000 = $ 26800
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