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Annette [7]
3 years ago
7

An investor company owns 30% of the outstanding common stock of an investee company, which allows the investor to exercise signi

ficant influence over the investee. The Equity Investment was reported at $500,000 as of the end of the previous year. During the year, the investor received dividends of $60,000 from the investee. The investee reports the following income statement for the year:
Business
1 answer:
kodGreya [7K]3 years ago
5 0

Answer:

Note: The full question is attached as picture below

a. Equity income that the investor should report in its income = Net income * Investor share = 400,000 * 30% = $120,000

b. Particulars                                 Amount

Equity investment opening           500,000

Add: Equity income                        120,000

Less: Dividend paid                        <u>60,000</u>

Equity investment at end of year  <u>560,000</u>

c. The fair value of the Investee company will remain at adjusted cost. and the investment is not adjusted to fair value

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