On January 1, 2018, Minimal, Inc., paid $80,000 for a 15% interest in Harrington Corporation’s common...
On January 1, 2018, Minimal, Inc., paid $80,000 for a 15% interest in Harrington Corporation’s common stock. This investee had assets with a book value of $225,000 and liabilities of $55,000. A customer list held by Harrington having a $8,000 book value was actually worth $21,000. Any further excess cost associated with this acquisition was attributed to goodwill. During 2018, Harrington earned income of $55,000 and declared and paid dividends of $12,000. In 2019, Harrington had income of $75,000 and dividends of $12,000. During 2019, the fair value of Minimal’s investment in Harrington had risen from $82,000 to $89,000. Assuming Minimal uses the fair-value method of accounting for its investment, what would Minimal record as income from its investment in Harrington in 2019? Show your work.
Homework Answers
| Dividend Income (12000*15%) | $ 1,800 |
| Increase in Fair Value (89000-82000) | $ 7,000 |
| Investing Income under Fair Value Accounting - 2019 | $ 8,800 |
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