Question
On January 1, 2020, Sheridan Co. purchased 24,000 shares (a 10% interest) in Elton John Corp. for $1,360,000. At the time, the book value and
On January 1, 2020, Sheridan Co. purchased 24,000 shares (a 10% interest) in Elton John Corp. for $1,360,000. At the time, the book value and the fair value of Johns net assets were $13,400,000. On July 1, 2021, Sheridan paid $3,350,000 for 48,000 additional shares of John common stock, which represented a 20% investment in John. As a result of this transaction, Sheridan owns 30% of John and can exercise significant influence over Johns 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 | $670,000 | None | ||
| Six months ended 6/30/21 | 480,000 | None | ||
| Six months ended 12/31/21 | 745,000 | $1.65 |
Determine the ending balance that Sheridan Co. should report as its investment in John Corp. at the end of 2021.
| Investment in Elton John Corp. = ?? |
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Wiley CIA Exam Review Test Bank Part 1 Essentials Of Internal Auditing
Authors: S. Rao Vallabhaneni
1st Edition
1119987237, 978-1119987239
