On January 1, 2017, Buffalo Co. purchased 25,000 shares (a 10% interest) in Elton John Corp....

On January 1, 2017, Buffalo Co. purchased 25,000 shares (a 10% interest) in Elton John Corp. for $1,290,000. At the time, the book value and the fair value of John’s net assets were $14,300,000.

On July 1, 2018, Buffalo paid $2,910,000 for 50,000 additional shares of John common stock, which represented a 20% investment in John. The fair value of John’s identifiable assets net of liabilities was equal to their carrying amount of $15,500,000. As a result of this transaction, Buffalo owns 30% of John and can exercise significant influence over John’s operating and financial policies. (Any excess fair value is attributed to goodwill.)

John reported the following net income and declared and paid the following dividends.

	Net Income	Dividend per Share
Year ended 12/31/17	$670,000	None
Six months ended 6/30/18	540,000	None
Six months ended 12/31/18	876,000	$1.40

Determine the ending balance that Buffalo Co. should report as its investment in John Corp. at the end of 2018.

Investment in Elton John Corp.

$

Expert Solution

ekkarill92 answered 1 year ago

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