Question

On January 1, 2018, Nana Company paid $100,000 for 8,000 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 $52,000 for the year ended December 31, 2018. The fair value of the Papa stock on that date was $45 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

$360,000

Step-by-step explanation:

As per the data given in the question,

Nana company paid = $10,000

Number of share = 8,000

Ownership in Papa company = 10%

Net Income = $52,000

Value = $45 per share

The amount will be reported in balance sheet of Nana company for the investment in Papa company = Value × Number of shares

= $45 × 8000 share

= $360,000