Reference no: EM131119037
Change from Fair Value to Equity On January 1, 2010, Sandburg Co. purchased 25,000 shares (a 10% interest) in Yevette Corp. for $1,400,000. At the time, the book value and the fair value of Yevette's net identifiable assets were $13,000,000. On July 1, 2011, Sandburg paid $3,040,000 for 50,000 additional shares of Yevette common stock, which represented a 20% investment in Yevette. The fair value of Yevette's identifiable assets net of liabilities was equal to their carrying amount of $14,200,000. As a result of this transaction, Sandburg owns 30% of Yevette and can exercise significant influence over Yevette's operating and financial policies. Any excess of the cost over the fair value of the identifiable net assets is attributed to goodwill. Yevette reported the following net income and declared and paid the following dividends.
Net Income Dividend per Share
Year ended 12/31/10 $900,000 None
Six months ended 6/30/11 500,000 None
Six months ended 12/31/11 815,000 $1.40
Determine the ending balance that Sandburg Co. should report as its investment in Yevette Corp. at the end of 2011.
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