Equity Method. For the next four questions, Parker Corp. purchased 30 percent of the common stock of Davis, Inc. for $450,000. At the date of purchase, Davis had net assets recorded at $1,000,000. The fair values of Davis' net assets equaled their book values except for land, which was worth $20,000 more than its book value, and machinery, which was worth $40,000 more than its book value and had a remaining life of 3 years. Any remaining excess is for intangibles with a remaining useful life of 6 years. Davis reported net income of $160,000 in year 1 and $180,000 in year 2, and declared dividends of $20,000 in both years.

5. What is Parker's Investment in S account balance at the end of Year 2?

a. $488,000.

b. $532,000.

c. $540,000.

d. $550,000.

e. None of the above.

answer is a. explain why.

and the book's explaination is

30 percent of ending book value	$390,000 -----why?
Add: for unamortized machinery	4,000
for land	6,000
for unamortized intangibles	88,000
	$488,000