On January 2, 2021, Zwick Company purchased 15% of Handy Corporation's common stock for $51,000. Handy's net income for the years ended December 31, 2021, and December 31, 2022, were $14,000 and $53,000, respectively. During 2021, Handy declared and paid a dividend of $66,000. On December 31, 2021, the fair value of the Handy stock owned by Zwick had increased to $67,000. How much should Zwick show in the 2021 income statement as income from this investment? Multiple Choice $22,000. $25,900. $16,000. $9,900.
On January 2, 2021, Zwick Company purchased 15% of Handy Corporation's common stock for $51,000. Handy's net income for the years ended December 31, 2021, and December 31, 2022, were $14,000 and $53,000, respectively. During 2021, Handy declared and paid a dividend of $66,000. On December 31, 2021, the fair value of the Handy stock owned by Zwick had increased to $67,000. How much should Zwick show in the 2021 income statement as income from this investment? Multiple Choice $22,000. $25,900. $16,000. $9,900.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
On January 2, 2021, Zwick Company purchased 15% of Handy Corporation's common stock for $51,000. Handy's net income for the years ended December 31, 2021, and December 31, 2022, were $14,000 and $53,000, respectively. During 2021, Handy declared and paid a dividend of $66,000. On December 31, 2021, the fair value of the Handy stock owned by Zwick had increased to $67,000. How much should Zwick show in the 2021 income statement as income from this investment?
Multiple Choice
-
$22,000.
-
$25,900.
-
$16,000.
-
$9,900.
Expert Solution
Step 1
When the investment company uses fair value method for its investment, it recognise two incomes in its income statement i.e. dividend income and increase in fair value of investment.
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