Question 5 Fox Ltd. invested $1,250,000 in Gloven Corp. early in the current yea

Question

Question 5 Fox Ltd. invested $1,250,000 in Gloven Corp. early in the current year, receiving 25% of its outstanding shares. At the time of the purchase, Gloven Corp. had a carrying amount of $3,337,500. Gloven Corp. pays out 35% of its net income in dividends each year. Assume that Fox Ltd. applies IFRS and that the 25% holding of Gloven shares is sufficient to enable Fox to significantly influence the operating, investing, and financing decisions of Gloven. Use the information in the following T account for the investment in Gloven to answer the following questions: Investment in Gloven Corp. 1,250,000 100,000 35,000 16,000 Collapse question part (a) How much was Fox Ltd.’s share of Gloven Corp.’s net income for the year?

Explanation / Answer

Answer

Answer 1

Investment in Gloven Corp. is $ 1,250,000.

Answer 2

Fox Ltd.’s share of Gloven Corp.’s net income for the year was 25% of total net income of Gloven Corp.

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