Question

On January 1, 2018, Nana Company paid $100,000 for 6,400 shares of Papa Company common stock. The ownership in Papa Company is 10%. Nana Company does not have significant influence over Papa Company. Papa reported net income of $60,000 for the year ended December 31, 2018. The fair value of the Papa stock on that date was $60 per share. What amount will be reported in the balance sheet of Nana Company for the investment in Papa at December 31, 2018?

Answer 1

The $384,000 is the amount which will be reported in the balance sheet of Nana Company for the investment in Papa at December 31, 2018

Step-by-step explanation:

Since in the given question, the Nana company does not have significant influence over Papa company, so the net income, retained earning, paid value would be considered in the calculation part.

The computation of investment reported in the balance sheet of Nana company is shown below:

= Number of shares × fair value per share

= 6,400 shares × $60

= $384,000

Thus, the $384,000 is the amount which will be reported in the balance sheet of Nana Company for the investment in Papa at December 31, 2018