Question

______ On January 2, 2021, Pod Company purchased 25% of the outstanding common stock of Jobs,...

______ On January 2, 2021, Pod Company purchased 25% of the outstanding common stock of Jobs, Inc. and subsequently used the equity method to account for the investment. During 2021, Jobs, Inc. reported net income of $420,000 and distributed dividends of $180,000. The ending balance in the investment account at December 31, 2021, was $320,000 after applying the equity method during 2021. What was the purchase price Pod Company paid for its investment in Jobs, Inc?

a.   $ 80,000

b.   $260,000

c.   $380,000

d.   $470,000

Business   Accounting   
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Answer #1
Answer:
Particulars Amount (in $ )
Ending balance in the Investment in Crane Company account $ 320,000
Add: Dividends received
              ( $ 180,000 x 25% )		 $ 45,000
Less: Net Income
                 ( $ 420,000 x 25% )		 ($ 105,000)
Purchase price Pod Company paid for its investment in Jobs, Inc $ 260,000
Option ( b ) is Correct  
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