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katen-ka-za [31]
3 years ago
9

Assume that, on January 1, 2021, Matsui Co. paid $1,795,200 for its investment in 74,800 shares of Yankee Inc. Further, assume t

hat Yankee has 220,000 total shares of stock issued. The book value and fair value of Yankee's identifiable net assets were both $440,000 at January 1, 2021. The following information pertains to Yankee during 2021:
Net income $240,000
Dividends declared and paid $72,000
Market price of common stock on 12/31/2016 $29/share

What amount would Matsui report in its year-end 2016 balance sheet for its investment in Yankee?
a. $1,608,000.
b. $1,368,000.
c. $1,329,600.
d. None of these answer choices is correct.
Business
1 answer:
mixas84 [53]3 years ago
8 0

Answer: $1,852,320

Explanation:

First find out the proportion owned by Matsui.

= 74,800 shares / 220,000

= 34%

The investment at the end of the year is:

= Cost of investment + Shares of net income - Share of dividend

Share of income:

= Percentage ownership * Net income

= 34% * 240,000

= $81,600

Share of dividend:

= 34% * 72,000

= $24,480

Investment at end of year:

= 1,795,200 + 81,600 - 24,480

= $1,852,320

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