On January 1, 2014, 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 2014 and 2015 was, respectively, $100,000 and $125,000. Dividends paid by Alberta Power Pool Corporation during 2014 and 2015 were, respectively, $60,000 and $75,000. Assume on December 31, 2015, TXU Europe Corporation sells 50% of its investment in Alberta Power Pool Corporation for $525,000. TXU Europe Corporation will report a:

Question

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TXU Europe Corporation's initial investment was $800,000. Over two years, they would recognize 40% of Alberta's net income: $40,000 (2014) + $50,000 (2015) = $90,000. They would also reduce their investment by 40% of dividends received: $24,000 (2014) + $30,000 (2015) = $54,000. The adjusted investment value before the sale is $800,000 + $90,000 - $54,000 = $836,000. Selling 50% of this investment means selling $418,000 worth. The sale price is $525,000, resulting in a gain of $525,000 - $418,000 = $107,000.

On January 1, 2014, TXU Europe Corporation Purchased 40% of the Outstanding