Company P purchased 70% stock in Company S on Jan 1, 20X1 for S170,000. For the year 20X1, Company S reported a net income of $100,000 and paid dividends of $40,000. At year-end, investment account in the books of Company P had a fair market value of $175,000. Under the fair value method, The unrealized loss will be credited with $25,000. The unrealized loss will be debited with $25,000. The unrealized gain will be credited with $5000. The extraordinary loss will be debited with $25,000.

Intermediate Accounting: Reporting And Analysis
3rd Edition
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Chapter12: Intangibles
Section: Chapter Questions
Problem 18E
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Company P purchased 70% stock in Company S on Jan 1, 20X1 for $170,000. For the year 20X1, Company S reported a net income of
$100,000 and paid dividends of $40,000. At year-end, investment account in the books of Company P had a fair market value of $175,000.
Under the fair value method,
O The unrealized loss will be credited with $25,000.
The unrealized loss will be debited with $25,000.
O The unrealized gain will be credited with $5,000.
The extraordinary loss will be debited with $25,000.
Transcribed Image Text:Company P purchased 70% stock in Company S on Jan 1, 20X1 for $170,000. For the year 20X1, Company S reported a net income of $100,000 and paid dividends of $40,000. At year-end, investment account in the books of Company P had a fair market value of $175,000. Under the fair value method, O The unrealized loss will be credited with $25,000. The unrealized loss will be debited with $25,000. O The unrealized gain will be credited with $5,000. The extraordinary loss will be debited with $25,000.
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