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Calculate Sultan income from the investment

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Reference no: EM132917609

Question - Calculate income for a midyear investment - Sultan Corporation pays $500,000 for a 20 percent interest in Chula Corporation on July 1, 2016, when Chula's capital stock is valued at $700,000, its retained earnings at $500,000, and the book value of Chula's net assets equals fair value. Additional information about Chula Corporation is given below:

a. It paid dividends of $25,000 on March 1, 2016, and $25,000 on September 1, 2016.

b. Its net income in 2016 was $150,000 (evenly throughout the year).

REQUIRED -

1. Calculate Sultan's income from the investment if the fair value/cost method is applied

2. Calculate Sultan's income from the investment if the equity method is applied.

Reference no: EM132917609

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