On January 1,2014,Benson Corporation paid $800,000 to purchase 40% of the outstanding stock of Kroger Company.Kroger Company reported net income of $200,000 for the year ending December 31,2014 and paid cash dividends of $60,000 during 2014.On January 1,2015,Benson Corporation sells its entire investment in Kroger Company for $1,100,000.Benson Corporation will report a(n):

Question

Quizplus · Accepted Answer

Benson Corporation paid $800,000 to purchase 40% of Kroger Company, which means that Benson had initially recognized $320,000 of Kroger's net income (40% x $200,000). Benson also received $24,000 in dividends (40% x $60,000) during the year 2014. 
Therefore, the total amount recognized by Benson in 2014 was $320,000 + $24,000 = $344,000. 
Upon selling its entire investment in Kroger for $1,100,000, Benson has a realized gain of $300,000 ($1,100,000 - $800,000 - $344,000). Therefore, the answer is C - realized gain on the sale of $244,000.

On January 1,2014,Benson Corporation Paid $800,000 to Purchase 40% of the Outstanding