Question
Grant, Inc., acquired 30% of South Co.s voting stock for $200,000 on January 2, Year 1, and did not elect the fair value option. The
Grant, Inc., acquired 30% of South Co.s voting stock for $200,000 on January 2, Year 1, and did not elect the fair value option. The price equaled the carrying amount and the fair value of the interest purchased in Souths net assets. Grants 30% interest in South gave Grant the ability to exercise significant influence over Souths operating and financial policies. During Year 1, South earned $80,000 and paid dividends of $50,000. South reported earnings of $100,000 for the 6 months ended June 30, Year 2, and $200,000 for the year ended December 31, Year 2. On July 1, Year 2, Grant sold half of its stock in South for $150,000 cash. South paid dividends of $60,000 on October 1, Year 2.
In Grants December 31, Year 1, balance sheet, what should be the carrying amount of this investment?
a. 224,000
b. 209,000
c. 200,000
d. 230,000
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