On January 1, 2020, Stellar Co. purchased 23,000 shares (a 10% interest) in Elton John Corp. for $1,340,000. At the time, the book value and the fair value of John’s net assets were $12,000,000. On July 1, 2021, Stellar paid $2,740,000 for 46,000 additional shares of John common stock, which represented a 20% investment in John. As a result of this transaction, Stellar 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 $720,000 None Six months ended 6/30/21 450,000 None Six months ended 12/31/21 742,000 $1.50 Determine the ending balance that Stellar Co. should report as its investment in John Corp. at the end of 2021.
On January 1, 2020, Stellar Co. purchased 23,000 shares (a 10% interest) in Elton John Corp. for $1,340,000. At the time, the book value and the fair value of John’s net assets were $12,000,000. On July 1, 2021, Stellar paid $2,740,000 for 46,000 additional shares of John common stock, which represented a 20% investment in John. As a result of this transaction, Stellar 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 $720,000 None Six months ended 6/30/21 450,000 None Six months ended 12/31/21 742,000 $1.50 Determine the ending balance that Stellar Co. should report as its investment in John Corp. at the end of 2021.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
On January 1, 2020, Stellar Co. purchased 23,000 shares (a 10% interest) in Elton John Corp. for $1,340,000. At the time, the book value and the fair value of John’s net assets were $12,000,000.
On July 1, 2021, Stellar paid $2,740,000 for 46,000 additional shares of John common stock, which represented a 20% investment in John. As a result of this transaction, Stellar owns 30% of John and can exercise significant influence over John’s operating and financial policies. (Any excess fair value is attributed to
John reported the following net income and declared and paid the following dividends.
|
Net Income
|
Dividend per Share
|
|||
|---|---|---|---|---|
|
Year ended 12/31/20
|
$720,000 | None | ||
|
Six months ended 6/30/21
|
450,000 | None | ||
|
Six months ended 12/31/21
|
742,000 | $1.50 |
Determine the ending balance that Stellar Co. should report as its investment in John Corp. at the end of 2021.
| Investment in Elton John Corp. | $Enter the investment in Elton John Corp. in dollars |
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 2 steps
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Recommended textbooks for you
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education