4) On January 2, Year 9, Bradley, Inc. acquired 30% of Norden Co.’s voting stock

Question

4) On January 2, Year 9, Bradley, Inc. acquired 30% of Norden Co.’s voting stock for $200,000. Bradley’s 30% interest in Norden gave Bradley the ability to exercise significant influence over Norden’s operating and financial policies. During Year 9, Norden earned $80,000 and paid dividends of $50,000. Bradley does not elect the fair value option to report this investment. In Bradley’s December 31, Year 9 balance sheet, what should be the carrying amount of this investment?

$191,000

$209,000

$230,000

$239,000

Explanation / Answer

Calculate carrying value of investment :

so answer is b) 209000

Initial investment 200000 Add: Portion of net income (80000*30%) 24000 Less: Dividend (50000*30%) -15000 Carrying amount of his investment 209000

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