On 1/1/2016, Wilson buys 25% of Taylormade for $500,000 and accounts for the

investment using the equity method. The carrying value of net assets at date of purchase

totaled $1,800,000. Fair value and the carrying values of the acquired assets were same

except for a factory with a 10 year useful life, which exceeded its carrying value by

$150,000 and inventory which exceeded its carrying value by $50,000. The inventory

was sold during 2016. (That is the fair value of Taylormades net assets were

$2,000,000). During 2016, Taylormade reports net income of $200,000 and paid $40,000

cash dividend. What amount should Wilson report as the carrying amount for its

investment in Taylormade at December 31

st

, 2016.

a.

$595,000

b.

$532,000

c.

$493,750

d.

$523,750