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On January 2, 2011, Winstead & Company purchased 1,100,000 shares of the Secrest Company for $32.0...

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Accounting

On January 2, 2011, Winstead & Company purchased 1,100,000shares of the Secrest Company for $32.0 million. The investmentrepresented 40 percent of the outstanding common shares of TheSecrest Company. During 2011, Secrest reported net earnings of$1.05 per share and paid a cash dividend of $0.35 per share.

During 2012, Secrest reported net earnings of $1.5 per share andpaid a cash dividend of $0.4 per share. Calculate the book value ofWinstead's investment in Secrest as of December 31, 2011, andDecember 31, 2012.

2011$Answer
2012$Answer

Answer & Explanation Solved by verified expert
3.9 Ratings (468 Votes)

Calculation of the book value of Winstead's investment in Secrest as of December 31, 2011, and December 31, 2012.
31.12.2011 31.12.2012
Book Value at the beginning $0.00 $32,770,000.00
Purchase cost of Common shares $32,000,000.00 $0.00
Net Income for the year
- $1.05 per share x 1100000 shares $1,155,000.00
- $1.5 per share x 1100000 shares $1,650,000.00
Dividends Paid
- $0.35 per share x 1100000 shares -$385,000.00
- $0.4 per share x 1100000 shares -$440,000.00
Book value at the end $32,770,000.00 $33,980,000.00
Answer
Year Book Value Winstead's investment in Secrest
2011 $32,770,000.00
2012 $33,980,000.00

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