As of the beginning of the year, Yoshida Limited acquired common stock of Verdugo Limited...
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Accounting
As of the beginning of the year, Yoshida Limited acquired common stock of Verdugo Limited at book value. During the current year, Verdugo earned $2.5 million and declared and paid cash dividends of $800,000.
Indicate the amount shown for Investment in Verdugo on Yoshidas balance sheet on December 31 and the amount of total income Yoshida would report on the income statement for the year related to its investment under the assumption that Yoshida did the following:
A. Paid $2 million for a 15-percent interest in Verdugo and classifies the investment as a passive investment. The fair value of the investment at December 31st was now $2.4 million.
B. Paid $7 million for a 35-percent interest in Verdugo and uses the equity method. The fair value of the investment at December 31st was now $7.3 million.
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