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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

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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 9 months ago
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