Ask Question
4 April, 23:44

Sox Corporation purchased a 30% interest in Hack Corporation for $ 1,725,000 on January 1, 2018. On November 1, 2018, Hack declared and paid $ 1.9 million in dividends. On December 31, Hack reported a net loss of $ 6.3 million for the year. What amount of loss should Sox report on its income statement for 2018 relative to its investment in Hack?

+3
Answers (1)
  1. 5 April, 01:05
    0
    The answer is $1,155,000

    Explanation:

    Purchase price is $1,725,000

    Dividends declared is $1,900,000

    So Sox Corporation's share of the dividend is $570,000 (30% of $1,900,000)

    Carrying value before net loss is:

    Purchase price - share of dividends

    $1,725,000 - $570,000

    =$1,155,000

    Net loss for the year is $6,300,000

    So Sox Corporation's share of the dividend is $1,890,000 (30% of $6,300,000)

    The net loss of $1,890,000 is greater than $1,155,000. The investment account cannot be negative ($1,155,000 - $1,890,000). Hence, carrying value of $1,155,000 will be recognized as the amount of loss Sox will report on his income statement for 2018
Know the Answer?
Not Sure About the Answer?
Find an answer to your question ✅ “Sox Corporation purchased a 30% interest in Hack Corporation for $ 1,725,000 on January 1, 2018. On November 1, 2018, Hack declared and ...” in 📘 Business if you're in doubt about the correctness of the answers or there's no answer, then try to use the smart search and find answers to the similar questions.
Search for Other Answers