9 Bahrain Corporation owns 3000 of the 10000 outstanding sha

9. Bahrain Corporation owns 3,000 of the 10,000 outstanding shares of Kuwait and Bahrain is able to exercise significant influence over the investee. Kuwait Corporation earns $240,00o and pays cash dividends of $80,000 during 2012. What amount should Bahrain show in the investment account at December 31, 2012 if the beginning balance of the investment account was $320,000? And, how much revenue from investment should Bahrain report in 2012? Investment Account Balance Revenue from Investment a. $392.000 b. $ 320,000 c. $ 368,000 d. $ 480,000 80000 48000 72000 24000 10, British Airline Company acquired 20% interest in Northwest Airway Company on December 31, 2011 for $135,000 and during 2012 Northwest Airway Company had net income of $75,000 and paid a cash dividend of $30,000, applying the fair value method would give a debit balance in the Investment in Northwest Airway Company Stock account at the end of 2012 of: a. $111,000 b. $144,000 c. $150,000. d. $135,000

Solution

Solution 9 - Answer (c) Calculation of Revenue from Investment and Balance of investment account in Kuwait Corporation

Bahrain has significant influenec on kuwait corporation

Significant influence =

(3000 Shares/10000 shares)*100%=30%

Solution 10 - (b) Calculation of Investment account balance

Particulars	Amount
Beginning balance of Investment	$320000
(+) Share of Net Revenue earned by Bahrain ($240000*30%) Revenue from Investment	$72000
(-) Shares of cash Dividend ($80000*30%)	$24000
Ending Balance of Incestment	$368000