World Languages High School

Lee, Inc. acquired 30% of Polk Corp.'s voting stock on January 1, Year 1 for $100,000. During Year 1, Polk earned $40,000 and paid dividends of $25,000. Lee's 30% interest in Polk gives Lee the ability to exercise significant influence over Polk's operating and financial policies. During Year 2, Polk earned $50,000 and paid dividends of $15,000 on April 1 and $15,000 on October 1. On July 1, Year 2, Lee sold half of its stock in Polk for $66,000 cash.

Answers

Answer 1

Question (continuation)

What should be the gain on sale of this investment in Lee's Year 2 income statement?

Answer:

The gain on sale is $12,250

Explanation:

Year 1:

Purchase Price for year 1 is $100,000

Year 1 Income: 30% of $40,000 = $12,000

Year 1 Dividend: 30% of $25,000 = $7,500 (Subtract)

Balance at the end of year 1 is $100,000 + $12,000 - $7,500 = $104,500

Year 2:

Year 2 income: ½ * 30% of $50,000 = $7,500 (For half a year)

Year 2 dividend: 30% of 15,000 = $4,500 (Subtract)

Balance at end of Year 2 = $104,500 + $7,500 - $4,500 = $107,500

Lee sold 50% of its stock = ½ of $107,500 = $53,750

Cost of half stock sold: $53,750

Selling price of: $66,000

Gain = $66,000 - $53,750 = $12,250

Related Questions

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Answers

Question 1 with 1 blank: "Escribo obras de teatro para que las presenten al público."

Revised Question: "¿Cuál es el trabajo relacionado con la creación de obras teatrales destinadas a ser representadas ante audiencias?"

Answer: Dramaturgo/Dramaturga (Playwright)

Question 2 with 1 blank: "Dirijo a las estrellas y las cámaras para hacer películas."

Revised Question: "¿Cuál es la profesión que implica liderar la actuación de actores y el equipo de filmación para la realización de películas?"

Answer: Director/Directora de cine (Film director)

Question 3 with 1 blank: "Trabajo con la computadora o con papel y pluma."

Revised Question: "¿Qué profesión implica trabajar con tecnología o herramientas tradicionales para crear contenido escrito?"

Answer: Escritor/Escritora (Writer)

Question 4 with 1 blank: "Paso todo el día practicando las notas con mi instrumento."

Revised Question: "¿Qué profesión implica dedicar largas horas a practicar y dominar un instrumento musical?"

Answer: Músico/Música (Musician)

Question 6 with 1 blank: "Me gusta escribir en versos, con palabras que riman (rhyme)."

Revised Question: "¿Cuál es la ocupación que disfruta componer utilizando estructuras poéticas, especialmente con rimas?"

Answer: Poeta (Poet)

Question 7 with 1 blank: "Hago grandes figuras de piedra de tres dimensiones."

Revised Question: "¿Cuál es la profesión relacionada con la creación de esculturas en piedra o materiales similares, con dimensiones tridimensionales?"

Answer: Escultor/Escultora (Sculptor)

Question 8 with 1 blank: "Sigo la música artísticamente con mi cuerpo."

Revised Question: "¿Qué profesión implica interpretar la música a través del movimiento corporal en una forma de arte expresiva?"

Answer: Bailarín/Bailarina (Dancer)

Question 9 with 1 blank: "Pienso en la música y luego la escribo."

Revised Question: "¿Qué ocupación involucra componer música mediante la conceptualización mental antes de ponerla por escrito?"

Answer: Compositor/Compositora (Composer)

Question 10 with 1 blank: "Mi voz (voice) es mi instrumento."

Revised Question: "¿Qué profesión implica utilizar la voz como el principal instrumento musical?"

Answer: Cantante (Singer)

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