Assume that, on January 1, 2018, Sosa Enterprises paid $3,000,000 for its investment in 36,000 shares of Orioles Co. Further, assume that Orioles has 120,000 total shares of stock issued and estimates an eight-year remaining useful life and straight-line depreciation with no residual value for its depreciable assets. At January 1, 2018, the book value of Orioles' identifiable net assets was $7,000,000, and the fair value of Orioles was $10,000,000. The difference between Orioles' fair value and the book value of its identifiable net assets is attributable to $1,800,000 of land and the remainder to depreciable assets. Goodwill was not part of this transaction.
The following information pertains to Orioles during 2018: What amount would Sosa Enterprises report in its year-end 2018 balance sheet for its investment in Orioles Co.?

Question

Assume that, on January 1, 2018, Sosa Enterprises paid $3,000,000 for its investment in 36,000 shares of Orioles Co. Further, assume that Orioles has 120,000 total shares of stock issued and estimates an eight-year remaining useful life and straight-line depreciation with no residual value for its depreciable assets. At January 1, 2018, the book value of Orioles' identifiable net assets was $7,000,000, and the fair value of Orioles was $10,000,000. The difference between Orioles' fair value and the book value of its identifiable net assets is attributable to $1,800,000 of land and the remainder to depreciable assets. Goodwill was not part of this transaction.
The following information pertains to Orioles during 2018:  What amount would Sosa Enterprises report in its year-end 2018 balance sheet for its investment in Orioles Co.?

Quizplus · Accepted Answer

This is $3,000,000 + (30% × $600,000 net income) - (30% × $360,000 dividends) - (30% × $1,200,000/8 yrs. of additional depreciation).

Assume That, on January 1, 2018, Sosa Enterprises Paid $3,000,000