Question
FASSV, Inc. acquired 30% of ISTP Corporation's voting stock on January 1, 2014 for $800,000. During 2014, ISTP earned $320,000 and paid dividends of $200,000.
FASSV, Inc. acquired 30% of ISTP Corporation's voting stock on January 1, 2014 for $800,000. During 2014, ISTP earned $320,000 and paid dividends of $200,000. FASSV's 30% interest in ISTP gives FASSV the ability to exercise significant influence over ISTP's operating and financial policies. During 2015, ISTP earned $400,000 and paid dividends of $120,000 on April 1 and $120,000 on October 1. On July 1, 2015, FASSV sold half of its stock in ISTP for $528,000 cash.
1. Before income taxes, what amount should FASSV include in its 2014 income statement as a result of the investment? 2. What is the carrying amount of this investment in FASSV's December 31, 2014 balance sheet? 3. What should be the gain on sale of this investment in FASSV's 2015 income statement?
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