Table 16-2
Big Corporation paid $95,000 to acquire a 30% investment in the common shares of Little Corporation on January 3, 2017. On December 31, 2017, Little Corporation's net income was $210,000 and Little Corporation paid dividends of $80,000. On December 31, 2018, Little Corporation's net income was $170,000 and Little Corporation paid dividends of $60,000. Big Corporation used the equity-method to account for this investment.
-Refer to Table 16-2.Big Corporation sells 50% of its shares of Little Corporation for $90,000 on January 3,2019.This would result in a:

Question

Quizplus · Accepted Answer

Selling 50% of the shares means Big Corporation will still hold only 15% ownership in Little Corporation. Therefore, Big Corporation will need to adjust its investment balance for the portion sold, resulting in a credit to the Investment in Investee Corporation's Common Shares account. There will be no impact on the Equity-Method Investment Revenue account.

Table 16-2 Big Corporation Paid $95,000 to Acquire a 30% Investment in Investment