On January 1,2016,TXU Europe Corporation purchased 40% of the outstanding stock of Alberta Power Pool Corporation for $800,000.Net income reported by Alberta Power Pool Corporation for 2016 and 2017 was,respectively,$100,000 and $125,000.Dividends paid by Alberta Power Pool Corporation during 2016 and 2017 were,respectively,$60,000 and $75,000.Assume on December 31,2017,TXU Europe Corporation sells 50% of its investment in Alberta Power Pool Corporation for $525,000.TXU Europe Corporation will report a:

Question

Quizplus · Accepted Answer

The initial investment was $800,000. TXU's share of net income for 2016 and 2017 is 40% of $100,000 and $125,000, which is $40,000 and $50,000, respectively. TXU's share of dividends for 2016 and 2017 is 40% of $60,000 and $75,000, which is $24,000 and $30,000, respectively. The carrying amount of the investment before the sale is $800,000 + $40,000 + $50,000 - $24,000 - $30,000 = $836,000. TXU sells 50% of its investment, so the carrying amount of the portion sold is 50% of $836,000, which is $418,000. The sale price is $525,000, resulting in a gain of $525,000 - $418,000 = $107,000.

On January 1,2016,TXU Europe Corporation Purchased 40% of the Outstanding