On January 2, 2017, Dellgate Corp. purchased 27% of Galaxy Corporation's voting stock for $125,000. During 2017, Galaxy recorded income of $214,000 and paid total dividends of $17,000. What is the December 31, 2017, balance sheet value of Dellgate's long-term equity investment in Galaxy?

Question

Quizplus · Accepted Answer

Dellgate's share of Galaxy's income is $27% x $214,000 = $57,780. Dellgate's share of Galaxy's dividends is $27% x $17,000 = $4,590. The balance sheet value of Dellgate's long-term equity investment in Galaxy is $125,000 + $57,780 - $4,590 = $178,190.