Exercise 22-22 Incorrect answer. Your answer is incorrect. Try again.

On January 1, 2017, Buffalo Co. purchased 23,000 shares (a 10% interest) in Elton John Corp. for $1,510,000. At the time, the book value and the fair value of Johns net assets were $12,900,000.

On July 1, 2018, Buffalo paid $2,760,000 for 46,000 additional shares of John common stock, which represented a 20% investment in John. The fair value of Johns identifiable assets net of liabilities was equal to their carrying amount of $14,000,000. As a result of this transaction, Buffalo owns 30% of John and can exercise significant influence over Johns 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.

Net Income Dividend per Share

Year ended 12/31/17 $680,000 None

Six months ended 6/30/18 $520,000 None

Six months ended 12/31/18 $888,000 $1.50

Determine the ending balance that Buffalo Co. should report as its investment in John Corp. at the end of 2018.

Investment in Elton John Corp. $Enter the investment in Elton John Corp. in dollars

Entry field with incorrect answer 4,552,900