Ask Question
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?

+3
Answers (1)
  1. 6 August, 11:41
    0
    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.
Know the Answer?
Not Sure About the Answer?
Get an answer to your question ✅ “On January 1, Puckett Company paid $2.01 million for 67,000 shares of Harrison's voting common stock, which represents a 40 percent ...” in 📙 Business if there is no answer or all answers are wrong, use a search bar and try to find the answer among similar questions.
Search for Other Answers