Question

On January 1, 2015, KMA Corp. paid $400,000 cash to acquire 40% of the common shares of JDL Corp. At the time of acquisition, the carrying value of JDL’s common shares was $250,000, and its retained earnings were $400,000. The fair values of the INA approximated their carrying values except for equipment whose fair value was $15,000 higher than its carrying value. The equipment has a six-year remaining useful life, and straight-line depreciation is used. The investment was found to be impaired by the amount of $8,000 by the end of 2015. JDL paid dividends of $10,000 in 2015 and reported net income of $120,000. What amount would be reported in KMA’s “investment in JDL” account at December 31, 2015, assuming the equity method is used? a) $435,000 b) $436,000 c) $439,000 d) $443,000

Answer 1

Particulars	Amount
Price paid	400,000
Share of excess fair value amortization	(1,000)
Share of net income	48,000
Dividends	(4,000)
Carrying value	443,000

Answer is:

443,000