On January 1, 2020, Culver 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 John’s net assets were $13,400,000. On July 1, 2021, Culver 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, Culver 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   $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 Culver Co. should report as its investment in John Corp. at the end of 2021

Question

On January 1, 2020, Culver 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 John’s net assets were $13,400,000.

On July 1, 2021, Culver 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, Culver 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
  $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 Culver Co. should report as its investment in John Corp. at the end of 2021.

 

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