Question

On January 1, 2013, Deuce Inc. acquired 15% of Wiz Co.'s outstanding common stock for $62,400 and categorized the investment as an available-for-sale security. Wiz earned net income of $96,000 in 2011 and paid dividends of $36,000. On January 1, 2014, Deuce bought an additional 10% of Wiz for $54,000. This second purchase gave Deuce the ability to significantly influence the decision making of Wiz. During 2014, Wiz earned $120,000 and paid $48,000 in dividends. As of December 31, 2014, Wiz reported a net book value of $468,000. For both purchases, Deuce concluded that Wiz Co.'s book values approximated fair values and attributed any excess cost to goodwill.
on deuce's december 31,2014 balance sheet, what balances was reported for the investment in Wiz coporation account?

Answer 1

Answer:

  Investment Cost

January 1, 2013  =                                     $62,400

January 1, 2014  =                                     $54,000

                                                                 $116,400

  Fair Values          

25% of   $468,000                                  $117,000  

On Deuce's December 31,2014 balance sheet, $116,400.00 will be reported for the investment in Wiz corporation account.   This is because the investment cost of $116,400 is lower when compare with fair value of  $117,000.                            

                             

Explanation:

The carrying amount for investments is the lower of cost and fair  value.