Suppose ChatNow owns the following investments at December 31, 2010:a. 100% of the common stock of..

Suppose ChatNow owns the following investments at December 31, 2010:a. 100% of the common stock of..

Suppose ChatNow owns the following investments at December 31, 2010:a. 100% of the common stock of ChatNow United Kingdom, which holds assets of £1,400,000 and owes a total of 1,200,000. At December 31, 2010, the current exchange rate of the pound (£) is £1 = $2.01. The translation rate of the pound applicable to stockholders equity is £1 = $1.64. During 2010, ChatNow United Kingdom earned net income of 120,000 and the average exchange rate for the year was £1 = $1.92. ChatNow United Kingdom paid cash dividends of £20,000 during 2010.b. Investments that ChatNow is holding to sell. These investments cost $1,500,000 and declined in value by $350,000 during 2010, but they paid cash dividends of $23,000 to ChatNow. One year ago, at December 31, 2009, the market value of these investments was $1,500,000.c. 45% of the common stock of ChatNow Financing Associates. During 2010, ChatNow Financing earned net income of $500,000 and declared and paid cash dividends of $25,000. The carrying amount of this investment was $500,000 at December 31, 2009.Requirements1. Which method is used to account for each investment?2. By how much did each of these investments increase or decrease ChatNow’s net income during 2010?3. For investments b and c, show how ChatNow would report these investments on its balance sheet at December 31, 2010.View Solution:
Suppose ChatNow owns the following investments at December 31 2

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