REFERENCE: Ref.01_08
On January 4,2007,Harley,Inc.acquired 40% of the outstanding common stock of Bike Co.for $2,400,000.This investment gave Harley the ability to exercise significant influence over Bike.Bike's assets on that date were recorded at $10,500,000 with liabilities of $4,500,000.There were no other differences between book and fair values.
During 2007,Bike reported net income of $500,000.For 2008,Bike reported net income of $800,000.Dividends of $300,000 were paid in each of these two years.
-What was the reported balance of Harley's Investment in Bike Co.at December 31,2008?

Question

Quizplus · Accepted Answer

Harley's investment is initially recorded at $2,400,000. For 2007, Harley's share of Bike's net income is 40% of $500,000 = $200,000, and for 2008, it is 40% of $800,000 = $320,000. Dividends received are 40% of $300,000 each year, totaling $240,000 over two years. The investment balance at the end of 2008 is $2,400,000 + $200,000 + $320,000 - $240,000 = $2,680,000.

REFERENCE: Ref.01_08 on January 4,2007,Harley,Inc.acquired 40% of the Outstanding Common Stock of Stock