Camp Corporation purchased 8,500 shares of Tent Corporation common stock for $80 per share on January 1,2014.Tent reported net income of $220,000 for 2014 and paid dividends of $90,000 during 2014.As of December 31,2014,the market value of Tent Corporation common stock was $80 per share.Assuming the shares owned by Camp represent 30 percent of the total outstanding stock of Tent,Camp Corporation should report the long-term investment on December 31,2014,at a carrying value of

Question

Quizplus · Accepted Answer

Camp Corporation should use the equity method since it owns 30% of Tent Corporation. The carrying value is calculated as the initial investment ($680,000) plus 30% of Tent's net income ($66,000) minus 30% of dividends received ($27,000), resulting in $719,000.

Camp Corporation Purchased 8,500 Shares of Tent Corporation Common Stock