Review of pre-consolidation equity method (controlling investment in affiliate, fair value differs from book value)

Assume an investee has the following financial statement information for the three years ending December 31, 2019:

(At December 31)201920182017Current assets$285,000$277,500$207,000Tangible fixed assets662,500575,000563,000Intangible assets40,00045,00050,000Total assets$987,500$897,500$820,000Current liabilities$120,000$110,000$100,000Noncurrent liabilities266,250242,500220,000Common stock100,000100,000100,000Additional paid-in capital100,000100,000100,000Retained earnings400,000345,000300,000Stockholders' equity600,000545,000500,000Total liabilities and equity$986,250$897,500$820,000

(For the years ended December 31)201920182017Revenues$970,000$920,000$850,000Expenses875,000840,000775,000Net income$95,000$80,000$75,000Dividends$40,000$35,000$25,000

Assume that on January 1, 2017, an investor company purchased 100% of the outstanding voting common stock of the investee. On the date of the acquisition, the investees identifiable net assets had fair values that approximated their historical book values, except for tangible fixed assets, which had fair value that was $112,500 higher than the investees recorded book value. The tangible fixed assets had a remaining useful life of 6 years. In addition, the acquisition resulted in goodwill in the amount of $218,750 recognized in the consolidated financial statements of the investor company. Assuming that the investor company uses the equity method to account for its investment in the investee, what is the balance in the investment in investee account in the investor companys pre-consolidation balance sheet on December 31, 2019?

$600,000

$875,000

$781,250

$989,250