Sox Corporation purchased a 40% interest in Hack Corporation for $1,500,000 on January 1, 2013. On November 1, 2013, 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 2013 relative to its investment in Hack?

Question

Quizplus · Accepted Answer

Sox should report a loss of $1,100,000 on its income statement for 2013 relative to its investment in Hack. This is calculated as follows:Loss reported by Hack = $6,000,000Sox's ownership interest = 40%Sox's share of loss = $6,000,000 x 40% = $2,400,000Less: Dividends received = $1,000,000Loss to be reported by Sox = $2,400,000 - $1,000,000 = $1,100,000

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