Reference no: EM133154955
Question - The following information comes from the 2021 annual report of Eugene Corp.
On May 2, 2021, Eugene sold its 41% equity interest in Chadwick Industries Corporation to Chadwick for $25 million and settled all of the pending arbitration proceedings, litigation and related disputes with Chadwick and its officers and other owners, pursuant to a settlement and redemption agreement. Eugene had acquired the Chadwick equity interest in 2007, when Eugene invested approximately $1.3 million in Chadwick. The investment in Chadwick was accounted for under the equity method and adjusted for earnings or losses as reported in the financial statements of Chadwick and dividends received from Chadwick. At December 31, 2020, the investment balance for Chadwick was $17.2 million, and for the years ended December 31, 2021, 2020 and 2019, the equity investment earnings was $5.2 million, $15.1 million and $11.6 million, respectively.
The following table summarizes Chadwick's financial information as of and for the year ended December 31 (in thousands):
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Jan. 1 - May 2, 2021
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Jan. 1 - Dec. 31, 2020
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Revenues
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$146,597
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$375,022
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Gross margin
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$18,118
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$50,677
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Net income
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$12,712
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$36,904
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December 31,
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2020
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Current assets
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$147,851
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Noncurrent assets
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3,367
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Current liabilities
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96,856
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Noncurrent liabilities
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12,411
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Equity
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$41,951
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Required - If Chadwick did not pay any dividends to Eugene during 2021, based on the above information, calculate the gain or loss on the May 2, 2021 sale.
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