Question

On March 15, 2017, Walker Company purchased 60,000 of the 200,000 (which is 30%) of the...

On March 15, 2017, Walker Company purchased 60,000 of the 200,000 (which is 30%) of the outstanding shares of Hurtado Company stock for $11.50 per share. On June 30, 2017, Hurtado paid an $80,000 dividend to its shareholders. On December 31, 2017, Hurtado declared net income of $420,000. The fair value of Hurtado’s stock was $13.75 per share on December 31, 2017.

At what amount will Walker report its investment in Hurtado Company stock on its December 31, 2017 balance sheet?

$736,000
$792,000
$825,000
$1,030,000
None of these answers are correct
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Homework Answers

Answer #1

Answer is $792,000

Explanation:

Number of shares purchased = 60000

Purchase price per share = $11.50

Total purchase price = Number of shares purchased*Purchase price per share = 60000*$11.50 = $690000

Share of dividend received from company = $80000*30% = $24000

Share of net income in Hurtado Company = ($420000 - $80000)*30% = $102000

Amount to be reported in walker report for its investment = Total purchase price + Share of net income in Hurtado Company

= $690000 + $102000 = $792000

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