Question
Rich, Inc. acquired 30% of Doane Corporation's voting stock on January 1, 2018 for $1,000,000. During 2018, Doane earned $400,000 and paid dividends of $250,000.
Rich, Inc. acquired 30% of Doane Corporation's voting stock on January 1, 2018 for $1,000,000. During 2018, Doane earned $400,000 and paid dividends of $250,000. Rich's 30% interest in Doane gives Rich the ability to exercise significant influence over Doane's operating and financial policies. On January 1, 2019, Rich sold half of its stock in Doane for $660,000 cash.
a. What accounting should be made by Rich, Inc. for dividends received from Doane subsequent to the date of investment?
b. What amount should Rich include in its 2018 income statement as a result of the investment?
c. What should be the carrying amount of this investment reported on Rich's December 31, 2018 balance sheet?
d. What should be the gain on sale of this investment in Rich's 2019 income statement?
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