Problem 1-6 (LO 1-3) On January 1, Puckett Company paid $2.22 million for 74,000
ID: 2328733 • Letter: P
Question
Problem 1-6 (LO 1-3)
On January 1, Puckett Company paid $2.22 million for 74,000 shares of Harrison’s voting common stock, which represents a 40 percent 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 during the year and reported net income of $620,000. What is the balance in the Investment in Harrison account found in Puckett’s financial records as of December 31?
Multiple Choice $2,692,000. $2,320,000. $2,408,800. $2,468,000.
Explanation / Answer
Balance in the Investment in Harrison account as of December 31 = 2220000+(620000*40%)-(74000*2)= $2320000
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