6 August, 10:42

# On January 1, Puckett Company paid \$2.01 million for 67,000 shares of Harrison's voting common stock, which represents a 40 percent investment. No allocation to goodwill or other specific account was made. Significant influence over Harrison is achieved by this acquisition and so Puckett applies the equity method. Harrison distributed a dividend of \$2 per share during the year and reported net income of \$595,000. What is the balance in the Investment in Harrison account found in Puckett's financial records as of December 31?

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1. 6 August, 11:41
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The \$2,114,000 is the balance in the Investment in Harrison account found in Puckett's financial records as of December 31.

Explanation:

Given that,

Purchase amount in respect for 67,000 shares = \$2,010,000

Investment percentage = 40%

Dividend = \$2 per share

Net income = \$595,000

Through these information which is shown above, we can calculate the balance in Investment in Harrison account. The steps for computation is shown below:

Step 1: Purchase amount

Step 2: Add Investment percentage income = Net income * Investment percentage

Step 3 : Less Dividend (Number of Shares * Dividend per share)

Now,

Purchase amount = \$2,010,000

Add - \$595,000 * 40% = \$238,000

Less - 67000 * \$2 = \$134,000

So, the final amount is \$2,114,000

Thus, the \$2,114,000 is the balance in the Investment in Harrison account found in Puckett's financial records as of December 31.