n January 1, 2017, Marian Co. acquired as a long term investment for $7,000,000 a 40% interest in an investee when the fair value of the net assets was $17,500,000. The investee has reported the following net losses: 2017 - 5,000,000 2018 - 7,000,000 2019 - 8,000,000 2020 - 4,000,000 On January 1, 2019, Marian Co. made cash advances of $2,000,000 to the investee. On December 31, 2020, it is not expected that Marian Co. will provide further financial support for the investee. Assuming in 2021, the investee earned a net income of $3,000,000, what amount must be recognized by Marian Co. as its share in the 2021 net income of the investee?
n January 1, 2017, Marian Co. acquired as a long term investment for $7,000,000 a 40% interest in an investee when the fair value of the net assets was $17,500,000. The investee has reported the following net losses: 2017 - 5,000,000 2018 - 7,000,000 2019 - 8,000,000 2020 - 4,000,000 On January 1, 2019, Marian Co. made cash advances of $2,000,000 to the investee. On December 31, 2020, it is not expected that Marian Co. will provide further financial support for the investee. Assuming in 2021, the investee earned a net income of $3,000,000, what amount must be recognized by Marian Co. as its share in the 2021 net income of the investee?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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On January 1, 2017, Marian Co. acquired as a long term investment for $7,000,000 a 40% interest in an investee when the fair value of the net assets was $17,500,000. The investee has reported the following net losses:
2017 - 5,000,000
2018 - 7,000,000
2019 - 8,000,000
2020 - 4,000,000
On January 1, 2019, Marian Co. made cash advances of $2,000,000 to the investee. On December 31, 2020, it is not expected that Marian Co. will provide further financial support for the investee. Assuming in 2021, the investee earned a net income of $3,000,000, what amount must be recognized by Marian Co. as its share in the 2021 net income of the investee?
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