https://file.aiquickdraw.com/mathbot/file/1726510454182dinsyack.jpg

To address the problem shown in the image, let’s break down the given data and calculate the amounts related to Halstead’s 2021 investment in Sedgwick Company common stock:

### Data from the Image:
- **Halstead Inc.** purchased 75,000 shares of Sedgwick for **$1,480,000** on January 1, 2019, gaining a **25%** ownership.
- Sedgwick’s net income and dividends:
  - **2019:** Net income = $340,000, Dividends = $120,000
  - **2020:** Net income = $480,000, Dividends = $140,000
  - **2021:** Net income = $600,000, Dividends = $160,000
- On **July 1, 2021**, Halstead sold **12,000 shares** at $25 per share, reducing ownership from **25% to 21%**.

### What needs to be calculated:
- The amounts that would appear on Halstead’s **2021 income statement** related to ownership and the sale of Sedgwick stock.
  - Apply equity method for income reporting before and after sale.
  - Consider gain/loss from the sale of shares.
  
### Step 1: Calculate Share of Net Income (Equity Method)
For 2021, the ownership changes halfway through the year. Thus, we split it into two periods:
- **January 1 to June 30 (before the sale)**: Ownership = 25%
- **July 1 to December 31 (after the sale)**: Ownership = 21%

Sedgwick's net income for 2021 is $600,000.

1. **Before the sale (25% ownership)**:
   - Net income for 6 months (half year): $600,000 / 2 = $300,000
   - Halstead’s share: 25% of $300,000 = **$75,000**

2. **After the sale (21% ownership)**:
   - Net income for the remaining 6 months: $300,000
   - Halstead’s share: 21% of $300,000 = **$63,000**

Total share of Sedgwick’s 2021 net income = $75,000 (before sale) + $63,000 (after sale) = **$138,000**.

### Step 2: Dividends Received
Dividends are paid quarterly. Total dividends for 2021 are $160,000.

1. **Before the sale (25% ownership)**:
   - Halstead’s share of dividends for 6 months: $160,000 / 2 = $80,000
   - 25% of $80,000 = **$20,000**

2. **After the sale (21% ownership)**:
   - Halstead’s share of dividends for the remaining 6 months: $80,000
   - 21% of $80,000 = **$16,800**

Total dividends received in 2021 = $20,000 (before sale) + $16,800 (after sale) = **$36,800**.

### Step 3: Gain from Sale of Shares
Halstead sold **12,000 shares** at **$25 per share**.

- Proceeds from sale = 12,000 × $25 = **$300,000**.
- Book value per share at the time of sale: Initial investment = $1,480,000 for 75,000 shares.
  - Book value per share = $1,480,000 / 75,000 = **$19.73**.
  - Book value of 12,000 shares sold = 12,000 × $19.73 = **$236,760**.

**Gain from sale** = Proceeds − Book value = $300,000 − $236,760 = **$63,240**.

### Step 4: Total Impact on Income Statement
1. **Equity method share of net income**: $138,000
2. **Dividends received**: $36,800
3. **Gain from sale**: $63,240

Thus, the total impact on Halstead's 2021 income statement would be:
- **$138,000 (net income share)**
- **+ $36,800 (dividends received)**
- **+ $63,240 (gain on sale)**

### Conclusion:
The amounts related to Halstead's investment in Sedgwick for 2021 are:
- **Share of net income**: $138,000
- **Dividends received**: $36,800
- **Gain on sale of shares**: $63,240

Would you like more details or have any questions?

Here are five related questions you may want to explore:
1. How does the equity method differ from the cost method in accounting for investments?
2. What would happen if the ownership percentage after sale fell below 20%?
3. How do dividends affect the carrying value of an investment under the equity method?
4. What are the tax implications of the sale of shares at a gain?
5. How do we account for goodwill when there is a difference between purchase price and book value?

**Tip:** Always split the year into periods when the ownership percentage changes, and apply the relevant percentage to each period.

Halstead, Inc. purchased 75,000 shares of Sedgwick Company stock for $1,480,000, gaining 25% ownership. In 2021, Halstead sold 12,000 shares, reducing its ownership from 25% to 21%. What would appear on Halstead's 2021 income statement regarding this ownership and sale?

Calculate the amounts for Halstead's 2021 income statement related to its 25% ownership and partial sale of Sedgwick shares. Understand the equity method, dividends, and gain from share sales using detailed formulas and accounting principles.

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