Use the following information to solve the following questions:
On January 1, 2020, Abalone Ltd. acquired 30% of Flounder Corp.'s common shares for $ 240,000. During 2020, Flounder reported net income of $ 100,000 and paid total dividends of $ 60,000. Abalone's 30% interest in Flounder gives Abalone the ability to exercise significant influence over their operating and financial policies. During 2021, Flounder reported net income of $ 150,000 and paid total dividends of $ 30,000 on April 1 and $ 40,000 on October 1. On July 1, 2021, Abalone sold half of its shares in Flounder for $ 158,000 cash.
-The carrying amount of this investment in Abalone's December 31, 2020, statement of financial position should be
A) $ 252,000.
B) $ 240,000.
C) $ 270,000.
D) $ 275,000.

Question

Quizplus · Accepted Answer

The carrying amount of the investment at December 31, 2020, can be calculated as follows: Initial investment of $240,000 + 30% of Flounder's net income for 2020 ($100,000 * 30% = $30,000) - 30% of dividends paid in 2020 ($60,000 * 30% = $18,000). This results in a carrying amount of $240,000 + $30,000 - $18,000 = $252,000.

Use the Following Information to Solve the Following Questions