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QUESTION 2 Investments (15 Marks) Sprott Corporation made the following purchases on January 15, 2017 Purchased 12% of the 250,000 common shares of Nico Limited
QUESTION 2 Investments (15 Marks) Sprott Corporation made the following purchases on January 15, 2017 Purchased 12% of the 250,000 common shares of Nico Limited at a total cost of $7 per share with the intent to sell within a year. Obtained significant influence over Acme Inc. by buying 30% of Acme's 120,000 common shares at a total cost of $26 per share. This is a long-term investment During the 2017 year, Nico declared and paid a cash dividend of $1.75 per share. The company reported net earnings of $745,000 for the year. On August 30, Acme declared and paid a cash dividend of $2.00 per share. On December 31, Acme reported net earnings were $450,000. On December 31, the market price for Nico Limited shares is $9.50 per share. The share price of Acme remains unchanged. Sprott has a December 31 year end. b) Explain how the income statement can be impacted when an investment is recorded under the Equity method and the investment company experiences a loss (2 marks) Dr Date Account title and explanation
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