On January 1, 2012, Mehan, Incorporated purchased 15,000 shares of Cook Company for $150,000 giving Mehan a 15% ownership of Cook. On January 1, 2013 Mehan purchased an additional 25,000 shares (25%) of Cook for $300,000. This last purchase gave Mehan the ability to apply significant influence over Cook. The book value of Cook on January 1, 2012, was $1,000,000. The book value of Cook on January 1, 2013, was $1,150,000. Any excess of cost over book value for this second transaction is assigned to a database and amortized over five years.
Cook reports net income and dividends as follows. These amounts are assumed to have occurred evenly throughout the years:
On April 1, 2014, just after its first dividend receipt, Mehan sells 10,000 shares of its investment.
What was the balance in the investment account at December 31, 2013?

Question

On January 1, 2012, Mehan, Incorporated purchased 15,000 shares of Cook Company for $150,000 giving Mehan a 15% ownership of Cook. On January 1, 2013 Mehan purchased an additional 25,000 shares (25%) of Cook for $300,000. This last purchase gave Mehan the ability to apply significant influence over Cook. The book value of Cook on January 1, 2012, was $1,000,000. The book value of Cook on January 1, 2013, was $1,150,000. Any excess of cost over book value for this second transaction is assigned to a database and amortized over five years.
Cook reports net income and dividends as follows. These amounts are assumed to have occurred evenly throughout the years: 
On April 1, 2014, just after its first dividend receipt, Mehan sells 10,000 shares of its investment.
What was the balance in the investment account at December 31, 2013?

Quizplus · Accepted Answer

$150,000 + $30,000 - $7,500 = $172,500 Balance 2012 Year End$172,500 + $300,000 + ($90,000 - $2,500) - $20,000 = $540,000 Balance 2013 Year End

On January 1, 2012, Mehan, Incorporated Purchased 15,000 Shares of Cook