Use the information below to answer the following questions:
On 1 January 2012, Sky-High Ltd acquired 100 000 shares (30% of the voting interest) in Down Ltd for $600 000 cash. On 30 June 2012, Down Ltd announced its earnings per share for the first 6 months of 2012 at $1.50 per share. On 20 November, Down Ltd paid dividends to shareholders at $0.90 per share. On 31 December 2012, Down Ltd announced its earnings per share for 2012 at $2.80 per share (i.e., $1.30 additional since 30 June).
-If Sky-High Ltd used the cost basis,what was the balance sheet value of investment in Down Ltd at 31 December 2012?
A) $510 000
B) $600 000
C) $690 000
D) $880 000.

Question

Quizplus · Accepted Answer

Using the cost basis, the balance sheet value of the investment would be the original cost of $600 000. There is no indication in the information given that Sky-High Ltd has adjusted the value of their investment based on changes in Down Ltd's earnings or dividends. Therefore, the balance sheet value remains at the original cost.

Use the Information Below to Answer the Following Questions