P Corporation purchased an 80% interest in S Corporation on January 1, 2013, at book value for $300,000.S's net income for 2013 was $90,000 and no dividends were declared.On May 1, 2013, P reduced its interest in S by selling a 20% interest, or one-fourth of its investment for $90,000.What would be the balance in the Investment of S Corporation account on December 31, 2013?
A)$300,000.
B)$225,000.
C)$279,000.
D)$261,000.

Question

Quizplus · Accepted Answer

The balance in the Investment of S Corporation account on December 31, 2013, would be $279,000. This is calculated as follows:Initial investment: $300,000Share of S's net income for 2013 (80% x $90,000): $72,000Balance before sale of investment: $372,000Sale of 20% interest: ($90,000)Balance after sale of investment: $279,000

P Corporation Purchased an 80% Interest in S Corporation on January