Question

Would you please prepare this under the cost method if possible?

• Prepare three tables and determine the amounts reported by A Company as income from its investment in B Company for each year and the balance in A Company’s investment in B Company at the end of each year using each of the three methods.
• Once, this has been completed post your answer as a main post in the Discussion area.
• Then reply to your classmates to assess their computations of each of the methods. If at all possible, make your replies to individuals evaluating other methods than the one you selected.
• Respond per your Syllabus guidelines.

Company A purchased 20 percent of the outstanding shares of B Company for $70,000 on January 1, 20X6. The following results are reported for Company B:

	20X6	20X7	20X8
Net Income	20,000	15,000	30,000
Dividends paid	7,000	15,000	10,000
Fair value of shares held by Gant
January 1	35,000	44,000	43,000
December 31	44,000	43,000	48,000

Answer 1

	Cost Method
	Year Ended 31 December	20X6	20X7	20X8
	Income Statement	Amount in $	Amount in $	Amount in $
	Dividend Revenue	1,400	3,000	2,000
	Unrealized holding gain or (loss)	-26,000	-1,000	5,000
	Balance Sheet	Amount in $	Amount in $	Amount in $
	Investment in B Company	44,000	43,000	48,000