Use the following information for questions
Hat Inc.purchased 10,000 shares of Cat Co.'s common shares for $10 a share on January 1.During the year, Cat paid a $50,000 cash dividend and earned $300,000 net income.On December 31, the market value of Cat's stock was $8 a share.The investment is to be held as a long-term investment and the decline in value is not considered permanent.
-Assuming Hat owned 25 percent of Cat's outstanding shares; Hat would report the net carrying value of their investment as:

Question

Use the following information for questions 
Hat Inc.purchased 10,000 shares of Cat Co.'s common shares for $10 a share on January 1.During the year, Cat paid a $50,000 cash dividend and earned $300,000 net income.On December 31, the market value of Cat's stock was $8 a share.The investment is to be held as a long-term investment and the decline in value is not considered permanent.
-Assuming Hat owned 25 percent of Cat's outstanding shares; Hat would report the net carrying value of their investment as:

Quizplus · Accepted Answer

Hat Inc. owns 25% of Cat Co., so it uses the equity method. Initial investment is $100,000. Add 25% of Cat's net income ($75,000) and subtract 25% of dividends received ($12,500). The net carrying value is $162,500.

Use the Following Information for Questions