Sox Corporation purchased a 40% interest in Hack Corporation for $1,975,000 on January 1, 2016. On...

Sox Corporation purchased a 40% interest in Hack Corporation for $1,975,000 on January 1, 2016. On November 1, 2016, Hack declared and paid $2.9 million in dividends. On December 31, Hack reported a net loss of $4.6 million for the year. What amount of loss should Sox report on its income statement for 2016 relative to its investment in Hack?

Expert Solution

SOX Corporation purchased a $40 \%$ interest in the Hack Corporation for $\$ 1,975,000 .$

On Nov 1, 2016 Hack declared and paid \$2,900,000 million in dividends.

Calculate the carrying value:

$$ \begin{aligned} \text { CarryingValue } &=\$ 1,975,000-40 \%(2,900,000) \\ &=\$ 1,975,000-\$ 1,160,000 \\ &=\$ 815,000 \end{aligned} $$

Net Loss given during the year reported by Hack is $\mathbf{4 , 6 0 0 , 0 0 0}$

Net Loss of $\mathbf{S O X}$ is

$$ \begin{array}{l} =\$ 4,600,000 \times 40 \% \\ =\$ 1,840,000 \end{array} $$

The value of carrying value is less than the net loss, since investments cannot be zero loss to the extent of carrying value is to be recognized.

Therefore, net loss to be recognized in the income statement is $\$ 815,000$ to be reported by SOX Corporation.

ekkarill92 answered 2 years ago

1. On January 1, 2016, TXU Europe Corporation purchased 40% of the outstanding stock of Alberta...

1. On January 1, 2016, TXU Europe Corporation purchased 40% of the outstanding stock of Alberta Power Pool Corporation for $800,000. Net income reported by Alberta Power Pool Corporation for 2016 and 2017 was, respectively, $100,000 and $125,000. Dividends paid by Alberta Power Pool Corporation during 2016 and 2017 were, respectively, $60,000 and $75,000. The long−term investment will appear on TXU Europe Corporation's December 31, 2017, balance sheet at: A.$864,000 B.$836,000 C.$746,000 D.$890,000 2.Retail Energy Corporation paid $1,300,000 on January...

1.On January 1, 2016, TXU Europe Corporation purchased 40% of the outstanding stock of Alberta Power...

1.On January 1, 2016, TXU Europe Corporation purchased 40% of the outstanding stock of Alberta Power Pool Corporation for $800,000. Net income reported by Alberta Power Pool Corporation for 2016 and 2017 was, respectively, $100,000 and $125,000. Dividends paid by Alberta Power Pool Corporation during 2016 and 2017 were, respectively, $60,000 and $75,000. The long−term investment will appear on TXU Europe Corporation's December 31, 2016, balance sheet at: A.$800,000 B.$776,000 C.$816,000 D.$840,000 2. The adjusting entry for investments at fair...

1/ Madison Corporation purchased 40% of Jay Corporation for $460,000 on January 1. On June 20...

1/ Madison Corporation purchased 40% of Jay Corporation for $460,000 on January 1. On June 20 of the same year, Jay Corporation declared total cash dividends of $115,000. At year-end, Jay Corporation reported net income of $575,000. The balance in Madison Corporation's Long-Term Investment-Jay Corporation account as of December 31 should be: Multiple Choice $736,000. $644,000. $851,000. $276,000. $460,000. 2/ McVeigh Corp. owns 40% of Gondor Company's common stock. McVeigh received $61,600 in cash dividends from Gondor. The entry to...

On January 1, 20X1, Warner Corporation purchased 40% of the common stock of ABC Corporation for...

On January 1, 20X1, Warner Corporation purchased 40% of the common stock of ABC Corporation for $400,000. This purchase gives Warner a significant influence in ABC?s operations. During the year, ABC earned total net income of $200,000 and paid total dividends of $40,000 to common stockholders. The fair market value of the stock at year end is $450,000. Prepare the required 20X1 journal entries for the Warner Corporation?s purchase of stock in ABC Corporation:

Question 1 Part A and B A. Nanki Corporation purchased equipment on January 1, 2016, for...

Question 1 Part A and B A. Nanki Corporation purchased equipment on January 1, 2016, for $630,000. In 2016 and 2017, Nanki depreciated the asset on a straight-line basis with an estimated useful life of eight years and a $6,000 residual value. In 2018, due to changes in technology, Nanki revised the useful life to a total of 6 years with no residual value. What depreciation would Nanki record for the year 2018 on this equipment? (Round your answer to...

37/ Madison Corporation purchased 40% of Jay Corporation for $400,000 on January 1. On June 20...

37/ Madison Corporation purchased 40% of Jay Corporation for $400,000 on January 1. On June 20 of the same year, Jay Corporation declared total cash dividends of $100,000. At year-end, Jay Corporation reported net income of $500,000. The balance in Madison Corporation's Long-Term Investment-Jay Corporation account as of December 31 should be: Multiple Choice $640,000. $240,000. $740,000. $400,000. $560,000. 38/Segmental Manufacturing owns 30% of Glesson Corp. stock. Glesson pays a total of $51,500 in cash dividends for the period. Segmental's...

Grant Company acquired 40% of the voting stock of Jake Corporation on January 1, 2016, for...

Grant Company acquired 40% of the voting stock of Jake Corporation on January 1, 2016, for $50,000,000. Basis differences were attributed entirely to goodwill. During the 5-year period from January 1, 2016 through December 31, 2020, Jake reported total net income of $23,000,000 and paid $8,000,000 in dividends. During 2021, Jake reported net income of $3,000,000 and paid $800,000 in dividends. Required: a. Calculate the balance in Investment in Jake, reported on Grant’s December 31, 2020 balance sheet. b. Calculate...

Pin Corporation paid $4,500,000 for a 90 percent interest in San Corporation on January 1, 2016;...

Pin Corporation paid $4,500,000 for a 90 percent interest in San Corporation on January 1, 2016; San’s total book value was $4,500,000. The excess was allocated as follows: $150,000 to undervalued equipment with a three-year remaining useful life and $350,000 to goodwill. The income statements of Pin and San for 2016 are summarized as follows (in thousands): Pin San Sales $9,000 $5,200 Income from San 450 Cost of sales (5,000) (3,600) Depreciation expense ...

On January 1, Kingman Corporation purchased a 40% equity in Lewis Company for $360,000. At December...

On January 1, Kingman Corporation purchased a 40% equity in Lewis Company for $360,000. At December 31, Lewis declared and paid a $40,000 cash dividend and reported net income of $98,000. Prepare the necessary journal entries for Kingman Corporation.

On January 1, 2020, Charles Corporation purchased 40% of the common shares of River Company for...

On January 1, 2020, Charles Corporation purchased 40% of the common shares of River Company for $400,000. During the year, River earned net income of $120,000 and paid dividends of $40,000. Prepare the entries for Charles to record the purchase and any additional entries related to this investment in River Company in 2020.

Question