On July 1, 2014, Dynamic Corporation purchased for cash 40% of the outstanding c

Question

On July 1, 2014, Dynamic Corporation purchased for cash 40% of the outstanding capital stock of Cart Co ber 31st, it has not yet been determined by Dynamic conclusively whether it has the ability to significantly influence Cart’s business operation. Cart Company’s stock is actively traded on the NASDAQ exchange reported its net income for the period ended October 31st to Dynamic. Cart also paid cash dividends on September 15th and December 15th to Dynamic and its other stockholders. How should Dynamic report the above facts in its October 31, 2014 financial statements. Discuss the rationale for your answer.  

Explanation / Answer

Dyanmic should show 40% outsatnding Capital stock purchased as => Investmet in Cart Co. under Assets side of balance sheet.

september 15, dividend already been recieved will be shown as incoem in income statement.

and dividend of 31st december can be shown in notes to account after balance sheet ie in foot notes.

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