Gain on Sale of Equity Investment - Kimm, Inc
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Kimm, Inc. acquired 30% of Carne Corp.'s voting stock on January 1, 2007 for $400,000. During 2007, Carne earned $160,000 and paid dividends of $100,000. Kimm's 30% interest in Carne gives Kimm the ability to exercise significant influence over Carne's operating and financial policies. During 2008, Carne earned $200,000 and paid dividends of $60,000 on April 1 and $60,000 on October 1. On July 1, 2008, Kimm sold half of its stock in Carne for $264,000 cash.
What should be the gain on sale of this investment in Kimm's 2008 income statement?
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Solution Summary
The solution schedules out the basis for the stock sold, and then calculates the gain that would be reportable.
Solution Preview
The basis in the investment is calculated as:
Original investment $400,000
Add: 30% of 2007 earnings 48,000
Less: 30% of ...
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