Question

Adams Industries holds 55,000 shares of FedEx common stock, which is not a large enough ownership interest to allow Adams to exercise significant influence over FedEx. On December 31, 2021, and December 31, 2022, the market value of the stock is $98 and $112 per share, respectively. What is the appropriate reporting category for this investment and at what amount will it be reported in the 2022 balance sheet

Answer 1

The explanation is given below:-

$6,160,000

Step-by-step explanation:

Since owning shares is not a huge enough to exert significant control. So, strategy for reporting would be a fair value process.

According to the scenario the computation of amount reported in the 2022 balance sheet is shown below:-

Fair value through net income = Shares of FedEx common stock × Market value of the stock of 31 Dec 2022

= 55000 × $112

= $6,160,000

So, for computing the amount reported in the 2022 balance sheet we simply multiply the Shares of FedEx common stock with Market value of the stock of 31 Dec 2022.