Burke Financial paid $$580,000$ for a $40\%$ investment in the common stock of Maverick, Inc. For the first year, Maverick reported net income of $$290,000,$ and at year$-$end declared and paid cash dividends

of $$125,000.$ On the balance$-$sheet date, the fair value of Burke's investment in Maverick stock was $$370,000.$

Read the requirements.

Requirement $1.$ Which method is appropriate for Burke to use in accounting for its investment in Maverick? Why?

It would be appropriate for Burke to use the

method of recording its investment in Maverick, Inc.

With a holding of this size, $40\%$ of the common stock, it

probable that Burke can exercise significant influence on the operations of Maverick, Inc.

Requirement $2.$ Show everything that Burke would report for the investment and any investment revenue in its year$-$end financial statements.

Balance Sheet $($partial$)$:

Assets

Income Statement $($partial$)$:

Requirements

Which method is appropriate for Burke to use in accounting for its investment

in Maverick? Why?

Show everything that Burke would report for the investment and any

investment revenue in its year$-$end financial statements.