# Explaining required - CFAI FSA book - Page 15

Can someone please explain to me how does the 20X2 and 20X3 Balance sheet carrying amount for Equity method is calculated? Based on Equity method is calculated using Cost + Equity in reinvested earnings 20X1 = 100 * \$80 + 100 (\$7-2) = 8500 20X2 = 70 * \$ 80 + 70(\$8-\$2) = \$6020 (however the book stated \$6370) 20X3 = \$8400 + 110(\$7-\$2) =\$8950 (however the book stated \$9720) Much apprecaited

JoeyDVivre, where are you??

Do you think Joey D has the brand new books? I don’t have the book in front of me, but I got 6370 in 20x2 by: \$70 * \$80 + 70(\$7 + \$8 - \$2 - \$2) = 6370 Aren’t the earnings/dividends cumulative? I think the book got 20x3 wrong though, then again I could be wrong. CFAI does a real bad job explaining how you get certain numbers in FSA sometimes.

Answer in words: You haven’t included the reinvested earnings for previous years. Balance sheet is cumulative as mdecav indicates. Work them out separately from date of each purchase and add to total cost. 20x3 = Total Cost + Retained earnings 20x1 to 20x3 for 70 shares held for this period + retained earnings 20x3 for 40 shares held for this period. Answer in numbers: 20X1 = \$8,000 + 100 (\$7-2) = 8500 20X2 = \$5,600 + 70 ( (\$7-\$2) + (\$8-\$2)) = \$6,370 20x3 = \$8,400 + 70 ((\$7-\$2) + (\$8-\$2) + (\$7-\$2)) + 40 (\$7-\$2) = \$9,720 (I think)

Thanks guys, that clears up my confusion.