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On January 1, 2017, Abalone Ltd.acquired 30% of Flounder Corp.'s common shares for $240,000.During 2017, 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 2018, 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, 2018, Abalone sold half of its shares in Flounder for $158,000 cash.
-The carrying amount of this investment in Abalone's December 31, 2017 balance sheet should be
A)$252,000.
B)$240,000.
C)$270,000.
D)$275,000.

Question

Quizplus · Accepted Answer

The carrying amount at the end of 2017 is calculated as the initial investment plus Abalone's share of Flounder's net income minus its share of dividends: $240,000 + (30% of $100,000) - (30% of $60,000) = $240,000 + $30,000 - $18,000 = $252,000.

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