On January 2, 2018, Baltimore Company purchased 5,000 shares of the stock of Towson Company at...
On January 2, 2018, Baltimore Company purchased 5,000 shares of the stock of Towson Company at $12 per share. Baltimore did NOT obtain significant influence as the purchase represents a 5% ownership stake in Towson Company. On August 1, 2018, Towson Company paid cash dividends of $27,000. Baltimore Company intended this investment to a long-term investment. On December 31, 2018, Towson Company reported $55,000 of net income for FY 2018. Additionally, the current market price for Towson Company's stock increased to $23 per share at the end of the year. Use this information to determine, how much Baltimore Company should report for its investment in Towson Company on December 31, 2018. (Round to the nearest dollar.)
Homework Answers
Value of investments:
| Cost of investment (5000 * 12) | 60000 |
| Add: Profit share (55000 * 5%) | 2750 |
| Add: Increase in equity reserve ((23 - 12 ) * 5000)*5% | 2750 |
| Less: Dividend received (27000 * 5%) | -1350 |
| Value of investment | 64150 |
Value of investment is $64150.
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On January 2, 2018, Baltimore Company purchased 5,000
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