On January 1, 2020, Pharoah Co. purchased 24,000 shares (a 10% interest) in Elton John Corp. for $1,300,000. At the time, the book value and the fair value of John's net assets were $12,900,000. On July 1, 2021, Pharoah paid $2,890,000 for 48,000 additional shares of John common stock, which represented a 20% investment in John. As a result of this transaction, Pharoah 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 $650,000 None Six months ended 6/30/21 470,000 None Six months ended 12/31/21 776,000 $1.50 Determine the ending balance that Pharoah Co. should report as its investment in John Corp. at the end of 2021. Investment in Elton John Corp. $

On January 1, 2020, Pharoah Co. purchased 24,000 shares (a 10% interest) in Elton John Corp. for $1,300,000. At the time, the book value and the fair value of John's net assets were $12,900,000. On July 1, 2021, Pharoah paid $2,890,000 for 48,000 additional shares of John common stock, which represented a 20% investment in John. As a result of this transaction, Pharoah 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 $650,000 None Six months ended 6/30/21 470,000 None Six months ended 12/31/21 776,000 $1.50 Determine the ending balance that Pharoah Co. should report as its investment in John Corp. at the end of 2021. Investment in Elton John Corp. $

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Concept explainers

Consolidation

Consolidation in general examination implies an asset oscillating between well-defined methods of trading status. Consolidation is commonly known as market indecisiveness, which completes when the asset's values move forward or backward the trading structure.

Question

On January 1, 2020, Pharoah Co. purchased 24,000 shares (a 10% interest) in Elton John Corp. for $1,300,000. At the time, the book
value and the fair value of John's net assets were $12,900,000.
On July 1, 2021, Pharoah paid $2,890,000 for 48,000 additional shares of John common stock, which represented a 20% investment in
John. As a result of this transaction, Pharoah 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
$650,000
None
Six months ended 6/30/21
470,000
None
Six months ended 12/31/21
776,000
$1.50
Determine the ending balance that Pharoah Co. should report as its investment in John Corp. at the end of 2021.
Investment in Elton John Corp. $

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