Steven Company Owns 40% of the Outstanding Voting Common Stock

question 41

Short Answer

Steven Company owns 40% of the outstanding voting common stock of Nicole Corp. and has the ability to significantly influence the investee's operations. On January 3, 2011, the balance in the Investment in Nicole Corp. account was $503,000. Amortization associated with this acquisition is $12,000 per year. During 2011, Nicole earned net income of $120,000 and paid cash dividends of $40,000. Previously in 2010, Nicole had sold inventory costing $35,000 to Steven for $50,000. All but 25% of that inventory had been sold to outsiders by Steven during 2010. Additional sales were made to Steven in 2011 at a transfer price of $75,000 that had cost Nicole $54,000. Only 10% of the 2011 purchases had not been sold to outsiders by the end of 2011.
What was the balance in the Investment in Nicole Corp. account at December 31, 2011?

---

Definitions:

Major Depression

A mental disorder characterized by at least two weeks of persistent sadness, loss of interest in activities, and other depressive symptoms.

Disturbances

Events or factors that disrupt the normal functioning or state of a system, environment, or individual.

Fatigue

A state of physical or mental weariness resulting from exertion.

Nondepressed People

Individuals who do not suffer from the symptoms of depression, characterized by a persistent feeling of sadness or a lack of interest in external stimuli.