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Mila [183]
3 years ago
8

On January 1, Puckett Company paid $1.6 million for 50,000 shares of Harrison’s voting common stock, which represents a 40 perce

nt investment. No allocation to goodwill or other specific account was made. Significant influence over Harrison is achieved by this acquisition and so Puckett applies the equity method. Harrison declared a $2 per share dividend during the year and reported net income of $560,000. What is the balance in the Investment in Harrison account found in Puckett’s financial records as of December 31
Business
1 answer:
Marysya12 [62]3 years ago
3 0

Answer:

The $1,724,000 is the investment amount which is to be recorded as of December 31.

Explanation:

For computing the investment income, the calculation is shown below:

= Paid value + net income percentage - dividend

where,

Paid value= $1.6 million

Net income percentage = Net income × percentage

                                        = $560,000 × 40%

                                        = $224,000

And, dividend = number of shares × per share

                       = 50,000 × 2

                       = $100,000

So, the investment amount would be

= Paid amount + net income percentage - dividend

= $1,600,000 + $224,000 - $100,000

= $1,724,000

Hence, the $1,724,000 is the investment amount which is to be recorded as of December 31.

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