Rich, Inc. acquired 30% of Doane Corp.'s voting stock on January 1, 2010 for $400,000. During 2010, Doane earned $160,000 and paid dividends of $100,000. Rich's 30% interest in Doane gives Rich the ability to exercise significant influence over Doane's operating and financial policies. During 2011, Doane earned $200,000 and paid dividends of $60,000 on April 1 and $60,000 on October 1. On July 1, 2011, Rich sold half of its stock in Doane for $264,000 cash.

Rich, Inc. acquired 30% of Doane Corp.'s voting stock on January 1, 2010 for $400,000. During 2010, Doane earned $160,000 and paid dividends of $100,000. Rich's 30% interest in Doane gives Rich the ability to exercise significant influence over Doane's operating and financial policies. During 2011, Doane earned $200,000 and paid dividends of $60,000 on April 1 and $60,000 on October 1. On July 1, 2011, Rich sold half of its stock in Doane for $264,000 cash.

Rich, Inc. acquired 30% of Doane Corp.'s voting stock on January 1, 2010 for $400,000. During 2010, Doane earned $160,000 and paid dividends of $100,000. Rich's 30% interest in Doane gives Rich the ability to exercise significant influence over Doane's operating and financial policies. During 2011, Doane earned $200,000 and paid dividends of $60,000 on April 1 and $60,000 on October 1. On July 1, 2011, Rich sold half of its stock in Doane for $264,000 cash.

Before income taxes, what amount should Rich include in its 2010 income statement as a result of the investment?


a. $160,000.
b. $100,000.
c. $48,000.
d. $30,000.


Answer: C because $160,000 × 30% = $48,000.


The carrying amount of this investment in Rich's December 31, 2010 balance sheet should be

a. $400,000.
b. $418,000.
c. $448,000.
d. $460,000.


Answer: B because $400,000 + $48,000 - ($100,000 × 30%) = $418,000.


What should be the gain on sale of this investment in Rich's 2011 income statement?


a. $64,000.
b. $55,000.
c. $49,000.
d. $40,000.

Answer: C because $49,000


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