When these type of stock acquisitions (INVESTMENTS )occur...One company buying s

Question

When these type of stock acquisitions (INVESTMENTS )occur...One company buying stock of another... the volume of stock acquired can fall into 3 categories... NonINFLUENTIAL INFLUENTIAL CONTROLLING INFLUENCE THERE ARE DIFFERENT ACCOUNTING TRATMENTS FOR EACH TYPE mdash FOCUS ON NON INFLUENTIAL VS INFLUFNTIAL REPORTING... Again....Corp. A bought Corp X stock...for$100,000. Corp X had net Income of 1.000.000 this year. They declared cash dividend and Corp A received $2500 in Dividends via check.... Value of the investment Account to start is $100,000. What is the balance of the 3 accounts listed at the end of this year #1 10% INTERST IN Co.X 25% INTEREST IN CoX

Explanation / Answer

Dividend Income Earning from Investment investment Balance 1) 2500 0 100000 2) 0 247500 347500 working notes 1) In this case Corp A does not have influence on Corp B as it holds 10% interest . in such a case only dividend share is recorded as dividend income and it has no interest in Corp B income and there is no change in investment account 2) In this case Corp A has significant influence in Corp B , hence its share of dividend and and net income in recorded through the investment account Original investment 100000 Less ; share in dividend 2500 Add : share in net income ( 1000000 * 25%) 250000 Investment account balance 347500

Related Questions

Navigate

• Browse (All)
• Browse W
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.