Photo Finish Corporation bought a 40% interest in the voting stock of Click It Corporation's $1 par value common stock for $20 million (2 million shares at a $10 market price) on March 31, 20X4. On December 31, 20X4, Click It paid a $1 million cash dividend declared earlier in 20X4 and reported net earnings for the year ended 20X4 of $10 million. On December 31, 20X4, Click Its stock was trading at $11.50 per share.
- At what amount will the Click It investment be reported on Photo Finish's December 31, 20X4 statement of financial position?
A) $20,000,000
B) $23,000,000
C) $23,600,000
D) $24,000,000

Question

Quizplus · Accepted Answer

Calculation: Click It investment ($23.6 million) = March 31, 20X4 cost ($20 million) + Investment income [Investee net income ($10 million) × Ownership percentage (40%)] - Proportionate share of investee dividends ($1 million × 40%).

Photo Finish Corporation Bought a 40% Interest in the Voting