On January 1, 2020, Orange Co. purchased a 35% interest in Lemon Co. for $800,000. Orange reports this investment using the equity method because it has significant influence. Both companies have a December 31 year end and report under IFRS.For the year ended December 31, 2020, Lemon reported profit of $470,000 and paid total cash dividends of $50,000.The fair value of Orange’s 35% interest in Lemon at December 31, 2020, was $840,000.What is the value of Orange’s investment in Lemon as at December 31, 2020? Question 3 options: a) $947,000 b) $800,000 c) $840,000 d) $1,220,000

A company can purchase the equity shares of another company for the purpose of investment. If the…

Answered: On January 1, 2020, Orange Co.…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

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On January 1, 2020, Orange Co. purchased a 35% interest in Lemon Co. for $800,000. Orange reports this investment using the equity method because it has significant influence. Both companies have a December 31 year end and report under IFRS.

For the year ended December 31, 2020, Lemon reported profit of $470,000 and paid total cash dividends of $50,000.
The fair value of Orange’s 35% interest in Lemon at December 31, 2020, was $840,000.

What is the value of Orange’s investment in Lemon as at December 31, 2020?

Question 3 options:

$947,000

$800,000

$840,000

d)	$1,220,000

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