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In: Accounting

Sofie Company buys stock in Nut Corporation in cash on January 1, 2020, and reports the...

Sofie Company buys stock in Nut Corporation in cash on January 1, 2020, and reports the investment as having no significant influence.
The percentage of investment 15% Amount paid $6,000,000
On January 1, 2022 Sofie Company makes the following additional investment in Nut Corporation and changes to the equity method of reporting for this investment:
The additional percentage of investment 25% Additional amount paid $15,000,000
December 31, 2020 December 31, 2021
Fair value of the 15% investment is as follows: $6,200,000 $6,450,000
Nut Corporation reported the following amounts for the years:  
2020 2021 2022
Net Income $150,000 $200,000 $250,000
Cash dividends (Paid at year-end) $50,000 $80,000 $100,000

Additional information: Nut Corporation reported no comprehensive income and any basis difference is attributed to goodwill.

Required:

Develop a table showing the calculation of what the amount Sofie Corporation will report on the balance sheet for the investment in Nut Corporation on December 31, 2022.

Solutions

Expert Solution

Investment Value Recorded in Sofei Corporation
Amount in $
Particulars As on 31st December 2020 As on 31st December 2021 As on 31st December 2022
Investment in Nut Corporation 60,00,000                                    64,50,000                                 214,50,000
Notes :-
1. As on 31st December 2020 & 31st December 2021 the investment value of Sofei Corporation in Nut Corporationis below 20% then the Investment show at Fair value in Sofei Corporation Balance Sheet.
2. The Investment value in year 2022 the investment share is increas 15% to 40% then the investment reported in Balance Sheet as per Investment Equity mothed .The Investment value as below.
Investment Balance as on 31st December 2021                                    64,50,000
25% Additional Value on 1st Jan.2022                                 150,00,000
Total Investment Value as on 31st December 2022                                 214,50,000

ekkarill92 answered 1 year ago
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