On January 1, 2017, Teal Co. purchased 24,000 shares (a 10% interest) in Elton John Corp. for $1,450,000. At the time, the book value and the fair value of John’s net assets were $12,000,000.
On July 1, 2018, Teal paid $2,740,000 for 48,000 additional shares of John common stock, which represented a 20% investment in John. The fair value of John’s identifiable assets net of liabilities was equal to their carrying amount of $13,200,000. As a result of this transaction, Teal owns 30% of John and can exercise significant influence over John’s operating and financial policies. (Any excess fair value is attributed to goodwill.)
John reported the following net income and declared and paid the following dividends.
Dividend per Share
Year ended 12/31/17$740,000NoneSix months ended 6/30/18510,000NoneSix months ended 12/31/18759,000$1.40
Determine the ending balance that Teal Co. should report as its investment in John Corp. at the end of 2018.
Investment in Elton John Corp.$