Question

On January 1, 2018, Bangle Company purchased 30% of the voting common stock of Sleat Corp. for $1,000,000. Any excess of cost over book value was assigned to goodwill. During 2018, Sleat paid dividends of $24,000 and reported a net loss of $140,000. What is the balance in the investment account on December 31, 2018?

Answer 1

The balance in the investment account on December 31, 2018 is $950,800

Step-by-step explanation:

The computation of the balance in the investment account is shown below:

= Common stock value - net loss - dividend amount

where,

Common stock is $1,000,000

Net loss = Net loss × percentage rate

= $140,000 × 30%

= $42,000

And, the dividend equals to

= dividend × percentage rate

= $24,000 × 30%

= $7,200

Now put these values to the above formula

So, the answer would be equal to

= $1,000,000 - $42,000 - $7,200

= $950,800