Huang Company owns 15,000 of the 50,000 outstanding ordinary shares of Xi Inc. The balance in the investment account at January 1, 2014 was ¥500,000,000. During 2014, Xi earned ¥800,000,000 and paid cash dividends of ¥640,000,000. The balance in the Investment in Xi account reported on Huang's December 31, 2014 statement of financial position should be

Question

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The balance in the Investment in Xi account at January 1, 2014 was ¥500,000,000. Huang Company's share of Xi Inc. earnings for 2014 is calculated as 15,000/50,000 x ¥800,000,000 = ¥240,000,000. The new balance in the Investment in Xi account will be the previous balance plus the share of earnings received minus dividends received, or ¥500,000,000 + ¥240,000,000 - ¥640,000,000 = ¥100,000,000. However, this is Huang's share of Xi's net assets, so it needs to be multiplied by the percentage of shares owned, or 15,000/50,000 = 30%. So, the balance in the Investment in Xi account reported on Huang's statement of financial position should be 30% x ¥100,000,000 = ¥30,000,000. Therefore, the correct answer is C (¥548,000,000, which is ¥500,000,000 + ¥240,000,000 - ¥640,000,000 + ¥30,000,000).

Huang Company Owns 15,000 of the 50,000 Outstanding Ordinary Shares