Question 15.2: Branch, a fictitious company, purchases a 20 percent interes...

International Financial Statement Analysis

Branch, a fictitious company, purchases a 20 percent interest in Williams (a fictitious company) for $200,000 on 1 January 2007. Williams reports income and dividends as follows:

Calculate the balance in the investment in Williams’s account that appears on Branch’s balance sheet.

	Income	Dividends
2007	$200,000	$50,000
2008	300,000	100,000
2009	400,000 ______	200,000 ______
	$900,000	$350,000

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Investment in Williams on 31 December 2009:

Initial cost	$200,000
Equity income 2007	$40,000 (20% of $200,000 Income)
Dividends received 2007	($10,000) (20% of $50,000 Dividends)
Equity income 2008	$60,000 (20% of $300,000 Income)
Dividend received 2008	($20,000) (20% of $100,000 Dividends)
Equity income 2009	$80,000 (20% of $400,000 Income)
Dividends received 2009	($40,000) (20% of $200,000 Dividends) ____________________________________
Balance	$310,000 [$200,000 + 20% × ($900,000 – $350,000)]

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