Chan Inc., a publicly traded company, purchased 20% of Dong Ltd.'s common shares for $225,000 on January

Question:

Chan Inc., a publicly traded company, purchased 20% of Dong Ltd.'s common shares for $225,000 on January 1. During the year, Dong reported profit of $350,000 and paid a dividend of $40,000. The investment's fair value at

December 31 was $275,000.

(a) Assuming there is significant influence, indicate the balance in the investment account at year end and where it would be reported in the statement of financial position if Chan uses the equity method.

(b) Assuming Chan does not have significant influence, determine the balance in the investment account at year end and where it would be reported in the statement of financial position if the fair value through profit or loss model is used.

(c) Assuming Chan reports under ASPE and chooses the cost model because fair value cannot be determined on December 31, determine the balance in the investment account at year end and where it would be reported in the statement of financial position?

Dividend
A dividend is a distribution of a portion of company’s earnings, decided and managed by the company’s board of directors, and paid to the shareholders. Dividends are given on the shares. It is a token reward paid to the shareholders for their...