Jack Corporation purchased a 20% interest in Jill Corporation for $1,500,000 on January 1, 2018. Jack can significantly influence Jill. On December 10, 2018, Jill declared and paid $1 million in dividends. Jill reported a net loss of $6 million for the year. What amount of loss should Jack report in its income statement for 2018 relative to its investment in Jill?

Question

Quizplus · Accepted Answer

Carrying value before net loss:
($1,500,000 - (20% × $1,000,000)) = $1,300,000
Jack's share of net loss would be recognized in full: 20% × $6,000,000 = $1,200,000.

Jack Corporation Purchased a 20% Interest in Jill Corporation for $1,500,000