1. Wrenn acquired 35% of Loy's voting stock on January 1, 2020, for $2,000,000. During 2020, Loy earned $650,000 and paid dividends of $500,000. Wrenn's 35% interest in Loy gives Wrenn the ability to exercise significant influence over Loy's operating and financial policies. During 2021, Loy earned $700,000 and paid cash dividends of $250,000 on April 1 and $250,000 on October 1. On July 1, 2021, Wrenn sold half of its stock in Loy for $1,200,000 cash. a) Before income taxes, what amount should Wrenn include in its 2020 income statement as a result of the investment? b) The carrying amount of this investment in Wrenn's December 31, 2020, balance sheet should be c) What should the gain be on sale of this investment in Wrenn's 2021 income statement?
1. Wrenn acquired 35% of Loy's voting stock on January 1, 2020, for $2,000,000. During 2020, Loy earned $650,000 and paid dividends of $500,000. Wrenn's 35% interest in Loy gives Wrenn the ability to exercise significant influence over Loy's operating and financial policies. During 2021, Loy earned $700,000 and paid cash dividends of $250,000 on April 1 and $250,000 on October 1. On July 1, 2021, Wrenn sold half of its stock in Loy for $1,200,000 cash.
a) Before income taxes, what amount should Wrenn include in its 2020 income statement as a result of the investment?
b) The carrying amount of this investment in Wrenn's December 31, 2020, balance sheet should be
c) What should the gain be on sale of this investment in Wrenn's 2021 income statement?
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