Question

On January 2, 2018, Surfside Co. purchased 12,000 shares of Sand, Inc. for $240,000. The investment...

On January 2, 2018, Surfside Co. purchased 12,000 shares of Sand, Inc. for $240,000. The investment represented 12% of Sand's outstanding shares. On December 31, 2018 each share of Sand was selling for $19 per share and on December 31, 2019 each share of Sand was selling for $23 per share. Sand declared and paid dividends totaling $20,000 in 2018 and 2019. What was the total amount reported on the income statement in 2019 by Surfside for its investment in Sand?

Group of answer choices

$38,400

$50,400

$45,600

$2,400

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Homework Answers

Answer #1

Answer: $ 2,400.

Share of dividends declared by Sand = $ 20,000 x 12 % = $ 2,400.

As the investment appears to be available for sale, any unrealized holding gains/ losses are not reported on the income statement of Surfside Co. Rather, they would be reported on the Statement of Other Comprehensive Income. Only the dividend revenue of $ 2,400 would be reported.

However, if the investment is treated as a trading investment, the amount to be reported on the 2019 income statement as Income from Investments = $ 2,400 + $ ( 23 - 19 ) * 12,000 = $ 50,400.

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