Fundamental Accounting Principles 22th Edition by John Wild ,Ken Shaw,Barbara Chiappetta

تمرين 66

Assume that you are Jolee Company's accountant. Company owner Mary Jolee has reviewed the 2015 financial statements you prepared and questions the $6,000 loss reported on the sale of its investment in Kemper Co. common stock. Jolee acquired 50,000 shares of Kemper's common stock on December 31, 2013, at a cost of $500,000. This stock purchase represented a 40% interest in Kemper. The 2014 income statement reported that earnings from all investments were $126,000. On January 3, 2015, Jolee Company sold the Kemper stock for $575,000. Kemper did not pay any dividends during 2014 but reported a net income of $202,500 for that year. Mary Jolee believes that because the Kemper stock purchase price was $500,000 and was sold for $575,000, the 2015 income statement should report a $75,000 gain on the sale.
Required
Draft a half-page memorandum to Mary Jolee explaining why the $6,000 loss on sale of Kemper stock is correctly reported.