On January 4, 2012, Harley, Inc. acquired 40% of the outstanding common stock of

Question

On January 4, 2012, Harley, Inc. acquired 40% of the outstanding common stock of Bike Co. for $2,400,000. This investment gave Harley the ability to exercise significant influence over Bike. Bike's assets on that date were recorded at $10,500,000 with liabilities of $4,500,000. There were no other differences between book and fair values. During 2012, Bike reported net income of $500,000. For 2013, Bike reported net income of $800,000. Dividends of $300,000 were paid in each of these two years. What was the reported balance of Harley's Investment in Bike Co. at December 31,2013? O $2.400000. O$2,500,0oo O $2.680,000o O $2,480,0o0 $2.600,00o.

Explanation / Answer

Harly can report investment at equity method

Answer is E. $2,600,000

Total assets of Bike co. $ 10,500,000 Less: Total liabilities of Bike co $ (4,500,000) Stockholders equity $    6,000,000 Add: Current year income $        500,000 Total stockholders equity $    6,500,000 Harly's percentage of interest 40% Reported balance of Harly's investment in Bike ($6,500,000*40%) $    2,600,000

Related Questions

Navigate

• Browse (All)
• Browse O
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.