On January 2, 2011, Winstead & Company purchased 1,100,000 shares of the Secrest Company for $32.0...

On January 2, 2011, Winstead & Company purchased 1,100,000 shares of the Secrest Company for $32.0 million. The investment represented 40 percent of the outstanding common shares of The Secrest Company. During 2011, Secrest reported net earnings of $1.05 per share and paid a cash dividend of $0.35 per share.

During 2012, Secrest reported net earnings of $1.5 per share and paid a cash dividend of $0.4 per share. Calculate the book value of Winstead's investment in Secrest as of December 31, 2011, and December 31, 2012.

2011	$Answer
2012	$Answer

Solutions

Expert Solution


Calculation of the book value of Winstead's investment in Secrest as of December 31, 2011, and December 31, 2012.
	31.12.2011	31.12.2012
Book Value at the beginning	$0.00	$32,770,000.00
Purchase cost of Common shares	$32,000,000.00	$0.00
Net Income for the year
- $1.05 per share x 1100000 shares	$1,155,000.00
- $1.5 per share x 1100000 shares		$1,650,000.00
Dividends Paid
- $0.35 per share x 1100000 shares	-$385,000.00
- $0.4 per share x 1100000 shares		-$440,000.00
Book value at the end	$32,770,000.00	$33,980,000.00

Answer
Year	Book Value Winstead's investment in Secrest
2011	$32,770,000.00
2012	$33,980,000.00

ekkarill92 answered 3 months ago

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