1. On January 3, 2019, ABC Co. paid $750,000 for 40% of the voting common stock of Pepsi Co. At the time of the investment, Pepsi had net assets with a book value and fair value of $1,800,000. During 2019, Pepsi incurred a net loss of $80,000 and paid dividends of $100,000. Any excess cost over book value is attributable to goodwill with an indefinite life.

What is the balance in ABCs investment account at December 31, 2019?

2. On January 4, 2007, ABC Co. purchased 40,000 shares (40%) of the common stock of Pepsi Co., paying $1,000,000. There was no goodwill or other cost allocation associated with the investment. ABC has significant influence over Pepsi Co. During 2007, Pepsi reported income of $200,000 and paid dividends of $80,000. On January 2, 2008 ABC sold 10,000 shares for $125,000.

What was the balance in the investment account after the shares had been sold?

3. ABC Co. purchases 40 percent of Pepsi Co. on January 1,2020 for $500,000. Although ABC did not use it, this acquisition gave ABC the ability to apply significant influence to Pepsis operating and financing policies. Pepsi reports assets on that date of $1,400,000 with liabilities of $500,000. One building with a seven-year remaining life is undervalued on Pepsis books by $140,000. Also, Pepsis book value for its trademark (10 year remaining life) is undervalued by $210,000. During 2020, Pepsi reports net income of $90,000 while declaring dividends of $30,000.

How much equity income should ABC recognize for 2020 related to this investment?