MATH SOLVE

2 months ago

Q:
# On December 31, 2016, Osborn Company purchased 30% of Shea Company’s common stock for $220,000. During 2017, Shea Company had a net income of $75,000 and paid cash dividends of $30,000. What would the balance of Osborn’s Equity Investment (Shea) account be at the end of 2017 if they use the equity method?A. $242,500 B. $211,000 C. $220,000 D. $233,500

Accepted Solution

A:

Answer:the balance of Osborn’s Equity Investment (Shea) account be at the end of 2017 is $233,500Step-by-step explanation:Given data Acquistion price = $220000purchased = 30%net income = $75,000cash dividends = $30,000to find out the balance of Osborn’s Equity Investment (Shea) account be at the end of 2017solutionwe will find out balance of investment i.e. given by formulabalance of investment = Acquistion price + share of income - share of dividend .................1so here share of income = 30% of net incomeshare of income =30% × 75,000 = $22500 ..............2and share of dividend = 30% of cash dividendsshare of dividend = 30% × 30000 = $9000 ...............3put equation 2 and 3 in equation 1 and we get balance of investment = Acquistion price + share of income - share of dividendbalance of investment = 220000 + 22500 - 9000balance of investment = $233,500