Lion Company purchases an investment in Africa Preserve Company at the purchase price of $6 million cash. This represents 25% of the book value of Africa Preserve. During the year, Africa Preserve reports net income of $1,200,000 and pays cash dividends of $100,000. At the end of the year, the fair value of Lion's investment is $6.4 million.
A. At what amount is the investment reported on Lion's balance sheet at year-end?
B. What amount of income from investments does Lion report? Explain.
C. Prepare journal entries to record the transactions for Lion Company.

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The Answer of Lion Company purchases an investment in Africa Preserve Company at the purchase price of $6 million cash. This represents 25% of the book value of Africa Preserve. During the year, Africa Preserve reports net income of $1,200,000 and pays cash dividends of $100,000. At the end of the year, the fair value of Lion's investment is $6.4 million.
A. At what amount is the investment reported on Lion's balance sheet at year-end?
B. What amount of income from investments does Lion report? Explain.
C. Prepare journal entries to record the transactions for Lion Company.

Lion Company Purchases an Investment in Africa Preserve Company at the Purchase