On January 1, 2015, Sheena Company purchased 30 percent of the outstanding common stock of Maryn Corporation

Question:

On January 1, 2015, Sheena Company purchased 30 percent of the outstanding of Maryn at a total cost of $485,000. Management intends to hold the stock for the long term. On the December 31, 2015, balance sheet, the investment in Maryn was $556,000, but no additional Maryn stock was purchased. The company received $90,000 in cash dividends from Maryn. The dividends were declared and paid during 2015. The company used the equity method to account for its investment in Maryn. The market price of Sheena Company’s share of Maryn stock increased during
2015 to a total value of $550,000.

Required:
1. Explain why the investment account balance increased from $485,000 to $556,000 during 2015.
2. What amount of revenue from the investment was reported during 2015?
3. If Sheena did not have significant influence over Maryn and used the fair value method, what amount of revenue from the investment should have been reported in 2015?
4. If Sheena did not have significant influence over Maryn and used the fair value method, what amount should be reported as the investment in Maryn on the December 31, 2015, balance sheet?

Common Stock
Common stock is an equity component that represents the worth of stock owned by the shareholders of the company. The common stock represents the par value of the shares outstanding at a balance sheet date. Public companies can trade their stocks on... Corporation
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