On January 1, 2020, Sarasota Co. purchased 23,000 shares (a 10% interest) in Elton John Corp. for $1,430,000. At the time, the book value and the fair value of John’s net assets were $13,800,000. On July 1, 2021, Sarasota paid $3,220,000 for 46,000 additional shares of John common stock, which represented a 20% investment in John. As a result of this transaction, Sarasota owns 30% of John and can exercise significant influence over John’s operating and financial policies. (Any excess fair value is attributed to goodwill.) John reported the following net income and declared and paid the following dividends. Net Income Dividend per Share Year ended 12/31/20 $770,000 None Six months ended 6/30/21 460,000 None Six months ended 12/31/21 820,000 $1.55 Determine the ending balance that Sarasota Co. should report as its investment in John Corp. at the end of 2021. Investment in Elton John Corp. $Enter the investment in Elton John Corp. in dollars
On January 1, 2020, Sarasota Co. purchased 23,000 shares (a 10% interest) in Elton John Corp. for $1,430,000. At the time, the book value and the fair value of John’s net assets were $13,800,000. On July 1, 2021, Sarasota paid $3,220,000 for 46,000 additional shares of John common stock, which represented a 20% investment in John. As a result of this transaction, Sarasota owns 30% of John and can exercise significant influence over John’s operating and financial policies. (Any excess fair value is attributed to goodwill.) John reported the following net income and declared and paid the following dividends. Net Income Dividend per Share Year ended 12/31/20 $770,000 None Six months ended 6/30/21 460,000 None Six months ended 12/31/21 820,000 $1.55 Determine the ending balance that Sarasota Co. should report as its investment in John Corp. at the end of 2021. Investment in Elton John Corp. $Enter the investment in Elton John Corp. in dollars
Intermediate Accounting: Reporting And Analysis
3rd Edition
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Chapter12: Intangibles
Section: Chapter Questions
Problem 18E
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Question
On January 1, 2020, Sarasota Co. purchased 23,000 shares (a 10% interest) in Elton John Corp. for $1,430,000. At the time, the book value and the fair value of John’s net assets were $13,800,000.
On July 1, 2021, Sarasota paid $3,220,000 for 46,000 additional shares of John common stock, which represented a 20% investment in John. As a result of this transaction, Sarasota owns 30% of John and can exercise significant influence over John’s operating and financial policies. (Any excess fair value is attributed to
John reported the following net income and declared and paid the following dividends.
|
Net Income
|
Dividend per Share
|
|||
|---|---|---|---|---|
|
Year ended 12/31/20
|
$770,000 | None | ||
|
Six months ended 6/30/21
|
460,000 | None | ||
|
Six months ended 12/31/21
|
820,000 | $1.55 |
Determine the ending balance that Sarasota Co. should report as its investment in John Corp. at the end of 2021.
| Investment in Elton John Corp. | $Enter the investment in Elton John Corp. in dollars |
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