30) On January 1, 2017, Pantera Company purchased 40% of Stratton Company’s 30,0

Question

30) On January 1, 2017, Pantera Company purchased 40% of Stratton Company’s 30,000 shares of voting common stock for a cash payment of $1,800,000 when 40% of the net book value of Stratton Company was $1,740,000. The payment in excess of the net book value was attributed to depreciable assets with a remaining useful life of six years. As a result of this transaction Pantera has the ability to exercise significant influence over Stratton Company’s operating and financial policies. Stratton’s net income for the ended December 31, 2017 was $600,000. During 2017, Stratton paid $325,000 in dividends to its shareholders. The income reported by Pantera for its investment in Stratton should be:

What is the ending balance in Pantera’s investment account as of December 31, 2017?

a) 1,800,000

b) 1,900,000

c) 1,910,000

d) 2,030,000

I know the answer is B but can you step by step, show me how you get there?

Explanation / Answer

Calculate ending balance of pantera's investment account :

so answer is b) $19,00,000

Investment value 1800000 Add: net income (600000*40%) 240000 Less: Dividend (325000*40%) -130000 1910000 Less: Goodwill amortization (1800000-1740000)/6 -10000 Ending balance of pantera's investment account 1900000

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