What was the reported balance of Harley's Investment in Bike Co.at December 31, 2017?

Question

Quizplus · Accepted Answer

According to the information given in the question, Harley had initially invested $2,000,000 in Bike Co. and then acquired an additional 20% of Bike Co.'s outstanding shares for $400,000 on January 1, 2017. Therefore, the total investment in Bike Co. at the beginning of 2017 was $2,400,000. The question states that Harley owns 70% of Bike Co. and that Bike Co.'s reported net income for the year was $800,000. Harley's share of this net income would be $560,000 (70% x $800,000). Adding this to the initial investment of $2,400,000 gives a reported balance of $2,960,000. However, we have to adjust for the amortization of the excess purchase price, which is $480,000 ($400,000 / 5 years x 1 year). Subtracting this from $2,960,000 gives a reported balance of $2,480,000 at December 31, 2017.

What Was the Reported Balance of Harley's Investment in Bike