Use the information below to answer the following questions:
On 1 January 2012, Yu Ltd acquired 100 000 shares (30% of the voting interest) in Ping Ltd for $900 000 cash. On 30 June 2012, Ping Ltd announced its earnings per share for the first 6 months of 2012 at $2.00 per share. On 20 November, Ping Ltd paid dividends to shareholders at $1.20 per share. On 31 December 2012, Ping Ltd announced its earnings per share for 2008 at $3.50 per share (i.e., $1.50 additional since 30 June).
-If Yu Ltd used the equity basis,what would be the balance sheet value of its investment in Ping Ltd at 31 December 2012?
A) $780 000
B) $1 130 000
C) $1 250 000
D) $900 000.

Question

Quizplus · Accepted Answer

Yu Ltd initially invested $900,000. The share of earnings for the year is 30% of (100,000 shares * $3.50/share) = $105,000. The share of dividends received is 30% of (100,000 shares * $1.20/share) = $36,000. The balance sheet value is $900,000 + $105,000 - $36,000 = $1,130,000.

Use the Information Below to Answer the Following Questions