Theron Co. owns 15,000 shares out of the 100,000 outstanding shares of Eury, Inc. As of year-end, Theron holds 20,000 stock rights which enable Theron to acquire additional shares fromEury on a "2 rights for 1 share" basis. The stock rights are exercisable immediately.However, Theron Co.'s management does not intend to exercise the stock rights. Eury doesnot have any other stock rights outstanding aside from those held by Theron. Eury reportsPage 9 of 10year-end profit of 4,000,000 and declares cash dividends of 400,000. The investment has acarrying amount of 1,200,000 before any year-end adjustment.20. At what amount should the investment be reported in Theron Co.'s year-end financialstatements?a. 1,200,000b. 1,800,000c. 1,740,000d. 1,849,200

total 15000 shares price = 15000*(4000000-400000)/100000 =540000

Answered: At what amount should the investment be…

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At what amount should the investment be reported in Theron Co.'s year-end financi

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

Theron Co. owns 15,000 shares out of the 100,000 outstanding shares of Eury, Inc. As of year-
end, Theron holds 20,000 stock rights which enable Theron to acquire additional shares from
Eury on a "2 rights for 1 share" basis. The stock rights are exercisable immediately.
However, Theron Co.'s management does not intend to exercise the stock rights. Eury does
not have any other stock rights outstanding aside from those held by Theron. Eury reports
Page 9 of 10
year-end profit of 4,000,000 and declares cash dividends of 400,000. The investment has a
carrying amount of 1,200,000 before any year-end adjustment.
20. At what amount should the investment be reported in Theron Co.'s year-end financial
statements?
a. 1,200,000
b. 1,800,000
c. 1,740,000
d. 1,849,200

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