$96,000. $82,500. $73,500. $60,000. Rich, Inc. acquired 30% of Doane Corp.\'s vo

Question

       $96,000.
       $82,500.
       $73,500.
       $60,000.

Rich, Inc. acquired 30% of Doane Corp.'s voting stock on January 1, 2012 for $600,000. During 2012, Doane earned $240,000 and paid dividends of $150,000. Rich's 30% interest in Doane gives Rich the ability to exercise significant influence over Doane's operating and financial policies. During 2013, Doane earned $300,000 and paid dividends of $90,000 on April 1 and $90,000 on October 1. On July 1, 2013, Rich sold half of its stock in Doane for $396,000 cash.

What should be the gain on sale of this investment in Rich's 2013 income statement? (Points : 2)

Explanation / Answer

(All values in $) Investment done by Rich Inc in Doane Corp 30% of stake 600000 Dividend Share for 2012 45000 Dividend Share for 2013 till July 1, 2013 27000 Total Stake Value 672000 Proportionate 50% stake sold 336000 Sale Value of 50% Stake 396000 Gain on Sale of 50% Stake (Investment) 60000 Option 4

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