Banchero Corp. purchases an investment in Kleber Co. at a price of $20.0 million. This represents a 40% ownership stake in Kleber, and Banchero accounts for the investment using the equity method. During the year, Kleber reports $2.5 million in net income, and pays $3.0 million in dividends. At year end, the fair value of Banchero's investment is $21.3 million. Banchero's year end balance sheet will show an investment asset balance of $21.3 million, and its income statement will show $1.2 million of income related to this investment. $19.8 million, and its income statement will show $0.2 million of losses related to this investment. $19.8 million, and its income statement will show $1.0 million of income related to this investment. $21.0 million, and its income statement will show $1.0 million of income related to this investment.
Banchero Corp. purchases an investment in Kleber Co. at a price of $20.0 million. This represents a 40% ownership stake in Kleber, and Banchero accounts for the investment using the equity method. During the year, Kleber reports $2.5 million in net income, and pays $3.0 million in dividends. At year end, the fair value of Banchero's investment is $21.3 million. Banchero's year end balance sheet will show an investment asset balance of $21.3 million, and its income statement will show $1.2 million of income related to this investment. $19.8 million, and its income statement will show $0.2 million of losses related to this investment. $19.8 million, and its income statement will show $1.0 million of income related to this investment. $21.0 million, and its income statement will show $1.0 million of income related to this investment.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Banchero Corp. purchases an investment in Kleber Co. at a price of
$20.0 million. This represents a 40% ownership stake in Kleber, and
Banchero accounts for the investment using the equity method.
During the year, Kleber reports $2.5 million in net income, and pays
$3.0 million in dividends. At year end, the fair value of Banchero's
investment is $21.3 million.
Banchero's year end balance sheet will show an investment asset
balance of
$21.3 million, and its income statement will show $1.2 million of income
related to this investment.
O $19.8 million, and its income statement will show $0.2 million of losses
related to this investment.
$19.8 million, and its income statement will show $1.0 million of income
related to this investment.
$21.0 million, and its income statement will show $1.0 million of income
related to this investment.
O $21.0 million, and its income statement will show $2.2 million of income
related to this investment.
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