On January 1, 2020, Orange Co. purchased a 35% interest in Lemon Co. for $800,000. Orange reports this investment using the equity method because it has significant influence. Both companies have a December 31 year end and report under IFRS. For the year ended December 31, 2020, Lemon reported profit of $470,000 and paid total cash dividends of $50,000. The fair value of Orange’s 35% interest in Lemon at December 31, 2020, was $840,000. What is the value of Orange’s investment in Lemon as at December 31, 2020?   Question 3 options:   a)  $947,000   b)  $800,000   c)  $840,000   d)  $1,220,000

Intermediate Accounting: Reporting And Analysis
3rd Edition
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Chapter13: Investments And Long-term Receivables
Section: Chapter Questions
Problem 14RE
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On January 1, 2020, Orange Co. purchased a 35% interest in Lemon Co. for $800,000. Orange reports this investment using the equity method because it has significant influence. Both companies have a December 31 year end and report under IFRS.

  • For the year ended December 31, 2020, Lemon reported profit of $470,000 and paid total cash dividends of $50,000.
  • The fair value of Orange’s 35% interest in Lemon at December 31, 2020, was $840,000.

What is the value of Orange’s investment in Lemon as at December 31, 2020?

 

Question 3 options:

 

a) 

$947,000
 

b) 

$800,000
 

c) 

$840,000
 

d) 

$1,220,000
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