Question & Answer: July 1, 2016, Harrelson Inc. acquired 25% of the shares of Jax Company. Harrelson paid $3,050,00…..

On July 1, 2016, Harrelson Inc. acquired 25% of the shares of Jax Company. Harrelson paid $3,050,000 for the investment, and that amount is exactly equal to 25% of the book value of identifiable net assets on Jax’s balance sheet. Jax recognized net income of $1,500,000 for 2016, and paid $160,000 of dividends each quarter to its shareholders. After all closing entries are made, Harrelson’s “Investment in Jax Company” account would have a balance of:

$3,157,500.

$3,237,500.

$3,431,250.

$3,385,000.

Expert Answer

After all closing entries are made, Harrelson’s “Investment in Jax Company” account would have a balance of:

$3,050,000 + 25 % * $1,500,000 * 6 /12 months

$ 3237500

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