Assume that, on January 1, 2018, Sosa Enterprises paid $3,000,000 for its investment in 60,000 shares of Orioles Co. Further, assume that Orioles has 120,000 total shares of stock issued and estimates an eight-year remaining useful life and straight-line depreciation with no residual value for its depreciable assets.

At January 1, 2018, the book value of Orioles' identifiable net assets was $7,000,000, and the fair value of Orioles was $10,000,000. The difference between Orioles' fair value and the book value of its identifiable net assets is attributable to $1,800,000 of land and the remainder to depreciable assets. Goodwill was not part of this transaction. The following information pertains to Orioles during 2018: Net Income $600,000 Dividends declared and paid $360,000 Market price of common stock on 12/31/2018 $80/share

What amount would Sosa Enterprises report in its year-end 2018 balance sheet for its investment in Orioles Co.?

Answer: $3,000,000 + (30% x $600,000 net income) (30% x $360,000 dividends) (30% x $1,200,000/8 yrs. of additional depreciation)

Please explain where the following numbers came from: How is $3,000,000 calculated? Where did 30% come from? How is $1,200,000 calculated?