Evan Company reports net income of $230,000 each year and declares an annual cas

Question

Evan Company reports net income of $230,000 each year and declares an annual cash dividend of $120,000. The company holds net assets of $1,600,000 on January 1, 2017. On that date, Shalina purchases 40 percent of Evan's outstanding common stock for $806,000, which gives it the ability to significantly influence Evan. At the purchase date, the excess of Shalina's cost over its proportionate share of Evan's book value was assigned to goodwill. On December 31, 2019, what is the Investment in Evan Company balance (equity method) in Shalina's financial records? 17 10 points Skipped

Explanation / Answer

Answer

The 2017 purchase is reported using the equity method.

Purchase price of Evan stock 806000 Book value of Evan stock (1600000 * 40%) 640000 Goodwill 166000 Life of goodwill Annual amortization 0

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