Sox Corporation Purchased a 40% Interest in Hack Corporation for $1,500,000

Sox Corporation purchased a 40% interest in Hack Corporation for $1,500,000 on Jan 1, 2009. On November 1, 2009, Hack declared and paid $1 million in dividends. On December 31, Hack reported a net loss of $6 million for the year. What amount of loss should Sox report on its income statement for 2009 relative to its investment in Hack?

A) $1,100,000.
B) $2,400,000.
C) $1,500,000.
D) $1,600,000.Carrying value before net loss: ($1,500,000 (40% $1,000,000) ) = $1,100,000
Sox's share of net loss = $6 million 40% = $2.4 million.Because the investment account cannot be reduced below zero, the loss reported in 2009 would be only $1,100,000.