Question
Blanco Company purchased 200 of the 1,000 outstanding shares of Darby Company's common stock for $600,000 on January 2, 2016. During 2016, Darby Company declared
Blanco Company purchased 200 of the 1,000 outstanding shares of Darby Company's common stock for $600,000 on January 2, 2016. During 2016, Darby Company declared dividends of $100,000 and reported earnings for the year of $400,000.
1. If Blanco Company used the fair value method of accounting for its 20% investment in Darby Company, and its fair value at 12/31/16 is $680,000, the Investment (Darby) account on December 31, 2016 should be
a. $580,000.
b. $660,000.
c. $600,000.
d. $680,000.
2. If Blanco Company uses the equity method of accounting for its 20% investment in Darby Company, its Equity Investment (Darby) account at December 31, 2016 should be
a. $580,000.
b. $600,000.
c. $660,000.
d. $680,000.
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