On January 2 Angle Corporation acquired 40% of the outstanding common stock of Bobbe Company for $550000. For the year ended December 31 Bobbe reported net income of $90000 and paid cash dividends of $30000 on its common stock. At December 31 the carrying value of Angle's investment in Bobbe under the equity method is

Question

Quizplus · Accepted Answer

To calculate the carrying value of Angle's investment in Bobbe under the equity method, we need to start with the initial investment of $550,000 and then add Angle's share of Bobbe's net income and subtract any dividends received.
Angle's share of Bobbe's net income is 40% x $90,000 = $36,000.
Angle's share of dividends received is 40% x $30,000 = $12,000.
So, the carrying value of Angle's investment in Bobbe at December 31 is:
$550,000 + $36,000 - $12,000 = $574,000. Therefore, the answer is D.

On January 2 Angle Corporation Acquired 40% of the Outstanding