ends LO a 14 LO2,5 Equity Investmen...... 14. Equity method of accounting On January 1, 2018, an investor company acquired 30% of an investee company's common stock for $600,000. As a result of this transaction, the investor can exert significant influence over the investee. During each year ended December 31, 2018 and 2019 the investee reported $120,000 of net income and $50,000 of dividends. On January 1, 2018, the book value of the investee's net assets was $2,000,000 and all individual net assets had appraised fair values that equaled their reported book values. On De- cember 31, 2019, what is the balance of the Equity Investment account on the Investor's balance sheet? $740,000 b. $642,000 c. $621,000 d. $600,000 a Use the following facts for Multiple Choice problems 15 and 16 (eack question is independent of the other): On January 1, 2019, an investor purchases 18,000 common shares of an investee at $12 (cash) per share. The shares represent 20% ownership in the investee. The investee's common stock has a read- ily determinable fair value. On January 1, 2019, the book value of the investee's assets and liabilities equals $1,230,000 and $150,000, respectively. On that date, the appraised fair values of the investee's identifiable net assets approximated the recorded book values. During the year ended December 31, 2019, the investee company reported net income equal to $50,000 and dividends equal to $15,000. On December 31, 2019, the fair value of the investee's stock is $16 per share. 15. Noncontrolling investment accounting (price equals book value) Assume the investor cannot evert inne 4,5 C. b. $642,000 $621,000 d. $600,000 Use the following facts for Multiple Choice problems 15 and 16 (each question is independent of the other): On January 1, 2019, an investor purchases 18,000 common shares of an investee at $12 (cash) per share. The shares represent 20% ownership in the investee. The investee's common stock has a read- ily determinable fair value. On January 1, 2019, the book value of the investee's assets and liabilities equals $1,230,000 and $150,000, respectively. On that date, the appraised fair values of the investee's identifiable net assets approximated the recorded book values. During the year ended December 31, 2019, the investee company reported net income equal to $50,000 and dividends equal to $15,000. On December 31, 2019, the fair value of the investee's stock is $16 per share. 15. Noncontrolling investment accounting (price equals book value) Assume the investor cannot exert significant influence over the investee. Determine the balance in the "Investment in Investee" account at December 31, 2019 $216,000 b. $223,000 $288,000 d. $295,000 16. Noncontrolling investment accounting (price equals book value) Assume the investor can exert significant influence over the investee. Determine the balance in the "Investment in Investee" account at December 31, 2019. $216,000 b. $223,000 $288,000 d. $295,000 c. a. C
