On January 3, 2011, Roberts Company purchased 30% of the 100,000 shares of common stock of Thomas Corporation, paying $1,500,000. There was no goodwill or other cost allocation associated with the investment. Roberts has significant influence over Thomas. During 2011, Thomas reported income of $300,000 and paid dividends of $100,000. On January 4, 2012, Roberts sold 15,000 shares for $800,000. What was the balance in the investment account before the shares were sold?

Question

Quizplus · Accepted Answer

The balance in the investment account before the shares were sold is $1,560,000. This is calculated as follows:Purchase price of 30% of Thomas Corporation shares = $1,500,000Share of Thomas Corporation's income for 2011 (30% x $300,000) = $90,000Share of Thomas Corporation's dividends for 2011 (30% x $100,000) = $30,000Balance in investment account before shares were sold = $1,500,000 + $90,000 + $30,000 = $1,560,000

On January 3, 2011, Roberts Company Purchased 30% of the 100,000