On January 4, 2011, Mason Co. purchased 40,000 shares (40%) of the common stock
ID: 2461944 • Letter: O
Question
On January 4, 2011, Mason Co. purchased 40,000 shares (40%) of the common stock of Hefly Corp., paying $560,000. At that time, the book value and fair value of Hefly's net assets was $1,400,000. The investment gave Mason the ability to exercise significant influence over the operations of Hefly. During 2011, Hefly reported income of $150,000 and paid dividends of $40,000. On January 2, 2012, Mason sold 10,000 shares for $150,000. What is the balance in the investment account after the sale of the 10,000 shares?
Answar is C) 453,000 can you show me how to cal
Explanation / Answer
Share in Profits : $1,50,000*40% = $60,000
Share in dividends = $40,000 * 40% = -$16,000;
Total value before sale = 560000+60000-16000 = $604,000;
Value of 10,000 shares = $604,000 * 10000/40000 = $151,000;
Balance in investment account = $604,000 - $151,000 = $453,000 (answer)
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