(Learning Objective 2: Applying the appropriate accounting method for a 30%

investment) Ashcroft Financial paid $590,000 for a 30% investment in the ordinary shares of Sonic, Inc. For the fi rst year, Sonic reported net income of $200,000 and at year-end declared and paid cash dividends of $125,000. On the balance-sheet date, the market value of Ashcroft’s investment in Sonic shares was $390,000.

❙ Requirements 1. Which method is appropriate for Ashcroft Financial to use in accounting for its investment in Sonic? Why?

2. Show everything that Ashcroft would report for the investment and any investment revenue in its year-end fi nancial statements.