1. During January 2010, ABC Co. acquired 30% of the outstanding common stock of Pepsi Co. for $1,600,000. This investment gave ABC the ability to exercise significant influence over Pepsi. Pepsis assets on that date were recorded at $7,200,000 with liabilities of $3,400,000. Any excess of cost over book value of ABCs investment was attributed to unrecorded patents having a remaining useful life of ten years.

In 2010, Pepsi reported net income of $650,000. For 2011, Pepsi reported net income of $800,000. Dividends of $250,000 were paid in each of these two years.

What was the reported balance of ABCs Investment in Pepsi Co. at December 31, 2011?

2. ABC Company purchased 200 of the 1,000 outstanding shares of Pepsi's common stock for $600,000 on January 2, 2021. During 2021, Pepsi declared dividends of $100,000 and reported earnings for the year of $400,000.

If ABC Company used the fair value method of accounting for its investment in Pepsi Co., its Equity Investments (Pepsi) account on December 31, 2021 should be?

3. ABC Company owns 15% of the common stock of Pepsi Co. and used the fair-value method to account for this investment. Pepsi reported net income of $120,000 for 2021 and paid dividends of $70,000 on October 1, 2021.

How much income should ABC recognize on this investment in 2021?