On January 2, 2021, Hamilton purchased 500,000 shares of common stock of Lafayette Enterprises for $33 00 per share At the date of purchase, the fair value and book value of the net assets of Lafayette were equal During 2021, Lafayette reported net income of $3 9 million and paid cash dividends of $1 05 per share On December 31, 2021, the market value of Lafayettes common stock was $35 60 per share Instructions Assuming the purchase represents 10 of the outstanding shares of Lafayette, What amount will Hamilton report as equity investment (net of fair value adjustment, if applicable) on the December 31, 2021 balance sheet How much income (including dividend revenues, investment income, and unrealized gains and losses, if applicable) will be recognized for the year ending December 31, 2021 (ignoring taxes) Assuming the purchase represents 40 of the outstanding shares of Lafayette, What amount will Hamilton report as equity investment (net of fair value adjustment, if applicable) on the December 31, 2021 balance sheet How much income (including dividend revenues, investment income, and unrealized gains and losses, if applicable) will be recognized for the year ending December 31, 2021 (ignoring taxes)

The Answer is in the image, click to view ...

Answered step by step

Verified Expert Solution

Link Copied!

Question

1 Approved Answer

Posted on Jul 01, 2024

On January 2, 2021, Hamilton purchased 500,000 shares of common stock of Lafayette Enterprises for $33.00 per share. At the date of purchase, the fair

On January 2, 2021, Hamilton purchased 500,000 shares of common stock of Lafayette Enterprises for $33.00 per share. At the date of purchase, the fair value and book value of the net assets of Lafayette were equal. During 2021, Lafayette reported net income of $3.9 million and paid cash dividends of $1.05 per share. On December 31, 2021, the market value of Lafayettes common stock was $35.60 per share.

Instructions

Assuming the purchase represents 10% of the outstanding shares of Lafayette,
- What amount will Hamilton report as equity investment (net of fair value adjustment, if applicable) on the December 31, 2021 balance sheet?
- How much income (including dividend revenues, investment income, and unrealized gains and losses, if applicable) will be recognized for the year ending December 31, 2021 (ignoring taxes)?
Assuming the purchase represents 40% of the outstanding shares of Lafayette,
- What amount will Hamilton report as equity investment (net of fair value adjustment, if applicable) on the December 31, 2021 balance sheet?
- How much income (including dividend revenues, investment income, and unrealized gains and losses, if applicable) will be recognized for the year ending December 31, 2021 (ignoring taxes)?