On January 1, 2021 ABC purchased 30% of the outstanding common stock of XYZ and subsequently...
On January 1, 2021 ABC purchased 30% of the outstanding common stock of XYZ and subsequently used the equity method to account for the investment. During 2021, XYZ reported net income of $1,200,000 and distributed total dividends of $500,000. The ending balance of the investment in XYZ at December 31, 2021 was $1,000,000 after applying the equity method during 2021. What was the initial purchase price ABC paid for its investment in XYZ?
Homework Answers
Calculate Initial purchase price
| Ending balance of investment | 1000000 |
| Net income (1200000*30%) | -360000 |
| Dividend (500000*30%) | 150000 |
| Initial purchase | 790000 |
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