Fair Value Method
Gant Company purchased 20 percent of the outstanding shares of Temp Company for $70,000 on January 1, 20X6. The following results are reported for Temp Company:
20X6
20X7
20X8
Net income
$40,000
$35,000
$60,000
Dividends paid
15,000
30,000
20,000
Fair value of shares held by Gant:
January 1
70,000
89,000
86,000
December 31
97,000
Required
Determine the amounts reported by Gant as income from its investment in Temp for each year and the balance in Gant’s investment in Temp at the end of each year assuming that Gant uses the following methods in accounting for its investment in Temp:
a. Cost method.
b. Equity method
c. Fair value method.
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