Calculate investment balance four years after acquisition Ray Corporation owns a 40 percent interest in the outstanding

Question:

Calculate investment balance four years after acquisition Ray Corporation owns a 40 percent interest in the outstanding common stock of Ton Corporation, having acquired its interest for $2,400,000 on January 1, 2011, when Ton’s stockholders’ equity was $4,000,000. The fair value/book value differential was allocated to inventories that were undervalued by $100,000 and sold in 2011, to equipment with a four-year remaining life that was undervalued by $200,000, and to goodwill for the remainder. The balance of Ton’s stockholders’ equity at December 31, 2016 , is $5,500,000, and all changes therein are the result of income earned and dividends paid.

REQUIRED:

Determine the balance of Ray’s investment in Ton at December 31, 2016.

Goodwill
Goodwill is an important concept and terminology in accounting which means good reputation. The word goodwill is used at various places in accounting but it is recognized only at the time of a business combination. There are generally two types of... Common Stock
Common stock is an equity component that represents the worth of stock owned by the shareholders of the company. The common stock represents the par value of the shares outstanding at a balance sheet date. Public companies can trade their stocks on... Corporation
A Corporation is a legal form of business that is separate from its owner. In other words, a corporation is a business or organization formed by a group of people, and its right and liabilities separate from those of the individuals involved. It may...