Gant Company purchased 30 percent of the outstanding shares of Temp Company for $77,000 on January 1, 20X6. The following results are reported for Temp Company: 20X6 20X7 20X8 Net income $ 44,000 $ 39,000 $ 53,000 Dividends paid 11,000 26,000 16,000 Fair value of shares held by Gant: January 1 77,000 96,000 93,000 December 31 96,000 93,000 104,000 Required: Determine the amounts reported by Gant as income from its investment in Temp for each year and the balance in Gant’s investment in Temp at the end of each year assuming that Gant uses the following options in accounting for its investment in Temp: Carries the investment at fair value. Uses the equity method.
Gant Company purchased 30 percent of the outstanding shares of Temp Company for $77,000 on January 1, 20X6. The following results are reported for Temp Company: 20X6 20X7 20X8 Net income $ 44,000 $ 39,000 $ 53,000 Dividends paid 11,000 26,000 16,000 Fair value of shares held by Gant: January 1 77,000 96,000 93,000 December 31 96,000 93,000 104,000 Required: Determine the amounts reported by Gant as income from its investment in Temp for each year and the balance in Gant’s investment in Temp at the end of each year assuming that Gant uses the following options in accounting for its investment in Temp: Carries the investment at fair value. Uses the equity method.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
Gant Company purchased 30 percent of the outstanding shares of Temp Company for $77,000 on January 1, 20X6. The following results are reported for Temp Company:
| 20X6 | 20X7 | 20X8 | |
|---|---|---|---|
| Net income | $ 44,000 | $ 39,000 | $ 53,000 |
| Dividends paid | 11,000 | 26,000 | 16,000 |
| Fair value of shares held by Gant: | |||
| January 1 | 77,000 | 96,000 | 93,000 |
| December 31 | 96,000 | 93,000 | 104,000 |
Required:
Determine the amounts reported by Gant as income from its investment in Temp for each year and the balance in Gant’s investment in Temp at the end of each year assuming that Gant uses the following options in accounting for its investment in Temp:
- Carries the investment at fair value.
- Uses the equity method.
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