1 answer

On January 1, 2020, Case Corporation purchased 3,000 of the 10,000 outstanding shares of common stock...

Question:

On January 1, 2020, Case Corporation purchased 3,000 of the 10,000 outstanding shares of common stock of Dow Corporation for

On January 1, 2020, Case Corporation purchased 3,000 of the 10,000 outstanding shares of common stock of Dow Corporation for $28,000 cash. At that date, Dow's balance sheet reflected the following book values. Assets not subject to depreciation . Assets subject to depreciation .. Liabilities. ........ Common stock (par $4) ........ Retained earnings, $10,000..... $25,000* 30,000** 5,000* 40,000 10,000 * Same as fair value. ** Fair value $38,000; the assets have a 10-year remaining useful life (straight-line depreciation). Dow Corporation reported net income of $18,000 in 2020 and declared and paid a $1 per share cash dividend. Required Assuming that the equity method is appropriate, determine the value of Case Corporation's Investment account on December 31, 2020, for its holding of common stock of Dow Corporation.

Answers

As per IFRS-3, in Equity Method, Investment increases by Net Income share and decreases by Dividend share.
Investment value as on Jan. 1, 2020 $28,000
+Share in Net Income $5,400
-Share in Dividend -$3,000
Investment value as on Dec. 31,2020 $30,400
.

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