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Homework answers / question archive / On January 1, 20X7, Poke Corporation acquired 25 percent of the outstanding shares of Shove Corporation for $100,000 cash

On January 1, 20X7, Poke Corporation acquired 25 percent of the outstanding shares of Shove Corporation for $100,000 cash

Accounting

On January 1, 20X7, Poke Corporation acquired 25 percent of the outstanding shares of Shove Corporation for $100,000 cash. Shove Company reported net income of $75,000 and paid dividends of $30,000 for both 20X7 and 20X8. The fair value of shares held by Poke was $110,000 and $105,000 on December 31, 20X7 and 20X8 respectively.

Based on the preceding information, what amount will be reported by Poke as income from its investment in Shove for 20X8, if it used the equity method of accounting?

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Computation of Income from Investment in Shove for 20X8, if it used the Equity Method of Accounting:

Income from Investment = Net Income *25%

= $75,000*25%

Income from Investment = $18,750