Sunland, Inc. acquired 20% of Doane Corporation\'s voting stock on January 1, 20

Question

Sunland, Inc. acquired 20% of Doane Corporation's voting stock on January 1, 2018 for $1060000. During 2018, Doane earned $418000 and paid dividends of $262000. Sunland's 20% interest in Doane gives Sunland the ability to exercise significant influence over Doane's operating and financial policies. During 2019, Doane earned $518000 and paid cash dividends of $162000 on April 1 and $162000 on October 1. On July 1, 2019, Sunland sold half of its stock in Doane for $678000 cash.

The carrying amount of this investment in Sunland's December 31, 2018 balance sheet should be

Explanation / Answer

The carrying amount of this investment in Sunland's December 31, 2018 balance sheet:

= $1,060,000 + ($418,000 - $262,000) x 20% = $1,091,200

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