Bendi Corp. purchased 1,000 shares of Kala Corp. for $16 per share. The investment represents 5% ownership, and Bendi does not have significant influence. The fair value at year-end is $15 per share. Assuming no other transactions occurred, where would the $1 per share difference be reported on the year-end financial statements? A. Operating Income B. Other Income and (Expense) C. Other Comprehensive Income D. None of the above

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21-04-2020
Business

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Bendi Corp. purchased 1,000 shares of Kala Corp. for $16 per share. The investment represents 5% ownership, and Bendi does not have significant influence. The fair value at year-end is $15 per share. Assuming no other transactions occurred, where would the $1 per share difference be reported on the year-end financial statements? A. Operating Income B. Other Income and (Expense) C. Other Comprehensive Income D. None of the above

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sadddamkashmiri801 sadddamkashmiri801 · Answer 1 · 2020-04-26T04:15:23+02:00

Answer:

Option C. Other Comprehensive Income

Explanation:

The reason is that the increase or decrease in fair market value of small investments with no significant influence, which means the shareholding is below 20%, must be reported in the other comprehensive income under the internation financial reporting guidelines. Because it doesn't relates to the core operation of the company so it must not be reflected in operating income. So the right option is option C.