Kim Company bought 30% of the shares of Phelps, Inc., at the start of 2018. Kim paid $10 million for the shares.Thirty percent of the book value of Phelps’s net assets is $8 million, and the difference of $2 million is due toland that Phelps owns that has appreciated in value. During 2018, Phelps reported net income of $1 million andpaid a cash dividend of $0.5 million. At what amount does Kim carry the Phelps investment on its balance sheetas of December 31, 2018?
Kim Company bought 30% of the shares of Phelps, Inc., at the start of 2018. Kim paid $10 million for the shares.Thirty percent of the book value of Phelps’s net assets is $8 million, and the difference of $2 million is due toland that Phelps owns that has appreciated in value. During 2018, Phelps reported net income of $1 million andpaid a cash dividend of $0.5 million. At what amount does Kim carry the Phelps investment on its balance sheetas of December 31, 2018?
Cornerstones of Financial Accounting
4th Edition
ISBN:9781337690881
Author:Jay Rich, Jeff Jones
Publisher:Jay Rich, Jeff Jones
ChapterA2: Investments
Section: Chapter Questions
Problem 11MCQ
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Kim Company bought 30% of the shares of Phelps, Inc., at the start of 2018. Kim paid $10 million for the shares.
Thirty percent of the book value of Phelps’s net assets is $8 million, and the difference of $2 million is due to
land that Phelps owns that has appreciated in value. During 2018, Phelps reported net income of $1 million and
paid a cash dividend of $0.5 million. At what amount does Kim carry the Phelps investment on its balance sheet
as of December 31, 2018?
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