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Semenov [28]
3 years ago
5

ABC Company owns 30% of the outstanding shares of Teal Company. At the beginning of the current year, the carrying value of Teal

's stock on ABC's balance sheet was $60,000. During the period, Teal paid dividends of $10,000 and reported a net income of $40,000. What is the carrying value of Teal's stock on ABC's balance sheet at the end of the year?
Business
1 answer:
BabaBlast [244]3 years ago
6 0

Answer:

$69,000

Explanation:

Percentage of shares owned by ABC in Teal's company = 30%

This is an example of equity method investment , and a portion of the attributable income at the end of the year is earned and added to the initial stock.

Attributable income is the remaining income after dividends have been settled.

<u>Workings</u>

The opening carrying value of the shares on ABC balance sheet = 60,000

Profit made at the end of the period = 40,000

Dividends paid = 10,000

Attributable income to share holders = 40000-10000 = 30,000

ABC portion of attributable profit = 30000*30% = 9,000

Carrying value at the end of the year = opening carrying value + portion of the attributable profit

=60000+9000=69000

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