Question

On July 1, 2021, Tremen Corporation acquired 40% of the shares of Delany Company. Tremen paid $3,070,000 for the investment, and that amount is exactly equal to 40% of the book value of identifiable net assets on Delany's balance sheet. Delany recognized net income of $1,400,000 for 2021, and paid $170,000 of dividends each quarter to its shareholders. After all closing entries are made for the year ended December 31, 2021, Tremen's "Investment in Delany Company" account would have a balance of:_______

Answer 1

Answer:

Tremen's "Investment in Delany Company" account would have abalance of $3,214,000 at the end year of December 31 ,2021.

Explanation:

Dividend paid for the whole year = $170,000*4 = 680,000

= $3,070,000 + (40%)(1/2 of the year)($1,400,000 - $680,000

= $3,070,000 + 144,000

= $3,214,000