Question

On January 2, 2020, Howdy Doody Corporation purchased 15% of Ranger Corporation's common stock for $56,000. Ranger's net income for the years ended December 31, 2020, and December 31, 2021, were $19,000 and $51,000, respectively. During 2020, Ranger declared and paid a dividend of $66,000. On December 31, 2020, the fair value of the Ranger stock owned by Howdy Doody had increased to $69,000. How much should Howdy Doody show in the 2020 income statement as income from this investment?

Answer 1

The Total amount shown as an income from this investment $22,900

Step-by-step explanation:

The computation fo the income from this investment is shown below:

Dividend received ($66,000 × 15%) $9,900

Increase in Fair value of Stock ($69,000 - $56,000) $13,000

The Total amount shown as an income from this investment $22,900

We simply added the dividend received and the increase in fair value so that the total amount could come