What the income reported by kimberley » Full Grade
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Question – Kimberley, Incorporated acquires 10% of Innovative Corporation on January 1, 2021, for $60,000 when the book value of Innovative was $600,000. During 2021 Innovative reported net income of $180,000 and paid dividends of $40,000. On January 1, 2022, Kimberley purchased an additional 20% of Innovative for $150,000. Any excess cost over book value is attributable to goodwill with an indefinite life.
The fair-value method was used during 2021 but Kimberley has deemed it necessary to change to the equity method after the second purchase. During 2022 Innovative reported net income of $200,000, and reported dividends of $50,000.
Required – What the income reported by Kimberley for 2022 with regard to the Innovative investment?
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