The following information comes from the 2016 annual report of Eugene Corporation On May 2, 2016, Eugene sold its 41 equity interest in Chemult Industries Corporation to Chemult for $25 million and settled all of the pending arbitration proceedings, litigation and related disputes with Chemult and its officers and other owners, pursuant to a settlement and redemption agreement Eugene had acquired the Chemult equity interest in 2007, when Eugene invested approximately $1 3 million in Chemult The investment in Chemult was accounted for under the equity method and adjusted for earnings or losses as reported in the financial statements of Chemult and dividends received from Chemult At December 31, 2015, our investment balance for Chemult was $17 2 million, and for the years ended December 31, 2016, 2015 and 2014, our equity in earnings was $5 2 million, $15 1 million and $11 6 million, respectively The following table summarizes Chemults financial information as of and for the year ended December 31 (in thousands) January 1 May 2, 2016 January 1 December 31, 2015 Revenues $146,597 $375,022 Gross Margin $18,118 $50,677 Net Income $12,712 $36,904 December 31, 2015 Current Assets $147,851 Noncurrent Assets $3,367 Current Liabilities $96,856 Noncurrent Liabilities $12,411 Equity $41,951 Required a Eugene used the equity method to account for its investment in Chemult Briefly explain how this accounting method affects Eugenes balance sheet and income statement b Use the income statement information for Chemult presented above, to calculate the equity earnings that Eugene reported on its 2015 income statement c Use the balance sheet information for Chemult presented above, to determine the investment balance for Chemult at December 31, 2015 d If Chemult did not pay any dividends to Eugene during 2016, based on the above information and your answer to c , what would have been the balance in Eugenes Investment in Chemult account just prior to the sale on May 2, 2016 Calculate the gain or loss on the sale

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The following information comes from the 2016 annual report of Eugene Corporation. On May 2, 2016, Eugene sold its 41% equity interest in Chemult Industries

The following information comes from the 2016 annual report of Eugene Corporation.

On May 2, 2016, Eugene sold its 41% equity interest in Chemult Industries Corporation to Chemult for $25 million and settled all of the pending arbitration proceedings, litigation and related disputes with Chemult and its officers and other owners, pursuant to a settlement and redemption agreement. Eugene had acquired the Chemult equity interest in 2007, when Eugene invested approximately $1.3 million in Chemult. The investment in Chemult was accounted for under the equity method and adjusted for earnings or losses as reported in the financial statements of Chemult and dividends received from Chemult. At December 31, 2015, our investment balance for Chemult was $17.2 million, and for the years ended December 31, 2016, 2015 and 2014, our equity in earnings was $5.2 million, $15.1 million and $11.6 million, respectively.

The following table summarizes Chemults financial information as of and for the year ended December 31 (in thousands):

	January 1 - May 2, 2016	January 1 - December 31, 2015
Revenues	$146,597	$375,022
Gross Margin	$18,118	$50,677
Net Income	$12,712	$36,904
		December 31, 2015
Current Assets		$147,851
Noncurrent Assets		$3,367
Current Liabilities		$96,856
Noncurrent Liabilities		$12,411
Equity		$41,951

Required:

a.	Eugene used the equity method to account for its investment in Chemult. Briefly explain how this accounting method affects Eugenes balance sheet and income statement.
b.	Use the income statement information for Chemult presented above, to calculate the equity earnings that Eugene reported on its 2015 income statement.
c.	Use the balance sheet information for Chemult presented above, to determine the investment balance for Chemult at December 31, 2015.
d.	If Chemult did not pay any dividends to Eugene during 2016, based on the above information and your answer to c., what would have been the balance in Eugenes Investment in Chemult account just prior to the sale on May 2, 2016? Calculate the gain or loss on the sale.