Question

On July 1, 2021, Tremen Corporation acquired 30% of the shares of Delany Company. Tremen paid $3,160,000 for the investment, and that amount is exactly equal to 30% of the book value of identifiable net assets on Delany's balance sheet. Delany recognized net income of $1,100,000 for 2021, and paid $140,000 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:

Amount paid to acquire investments                            $3,160,000

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Net income                                             $1,100,000  

Less: Yearly dividends (140,000*4) ($560,000)

Income after dividends                          $540,000

Share in income after dividends

for 6 months  ($540,000 * 30% * 6/12)                             $81,000

Balance of investments of Tremen corporation    $ 3,079,000

Hence, the balance of investments of Tremen corporation in Delany company is $3,079,000 .