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How much total income should pondu recognize

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On 1/1/20X3 the Pondu Company (Pondu) paid $100,000 for 22 percent of the outstanding voting stock of Key. At that time, the net book value of Key equaled the fair value of Key's stock. However, another corporation holds the other 78 percent ownership and does not take Pondu's input into consideration when making financing and operating decisions for Key. Consider that fact when determining the appropriate accounting method for Pondu to use for this investment.

  • The Key Corporation (Key) reported net income for the current year of $200,000 and paid cash dividends of $30,000.
  • At 12/31/20X3 Pondu's investment in Key has a fair value of $108,000. ($108,000 is the fair value of the 22% investment, not the entire Key Corporation.)

Question problem 1: How much total income should Pondu recognize for 20X3 related to this investment?

Reference no: EM132460174

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