Homework SourseA Inc uses the equity method of reporting its 40 investment
A Inc. uses the equity method of reporting its 40% investment in B. The balance in the Investment in B was $70,750 at January 1, 2015. During the next three years, B reported the following net earnings (losses) and dividends paid
Net earnings (loss)
$
Dividends paid
$
2015
155,600
140,000
2016
35,700
140,000
2017
(123,400)
0
Required:
Calculate the balance of the Investment in B\'s account at December 31, 2017.
| Net earnings (loss) $ | Dividends paid $ | |
| 2015 | 155,600 | 140,000 |
| 2016 | 35,700 | 140,000 |
| 2017 | (123,400) | 0 |
Solution
Solution:
Balance Jan. 1, 2015 ………………………………………………………………… $70,750
Proportionate share of earnings for 2015 - $155,600 x 40% …………………...…62,240
Dividends received during 2015 140,000 x 40% ……………………………….......(56,000)
Balance Dec. 31, 2015 ……………………………………………………………..… 76,990
Proportionate share of earnings for 2016 – 35,700 x 40% ………………………. 14,280
Dividends received during 2016 140,000 x 40% ……………………………….… (56,000)
Balance Dec. 31, 2016 …………………………………………………………………35,270
Proportionate share of losses for 2017- 123,400x40% = 49,360 but
there is only 35,270 in account …………………………………………………..…. (35,270)
Balance Dec. 31, 2017…………………………………………………………………… 0
