ABC Company purchased 20% of the voting common stock of ABC Company on January 1 and paid $400,000 for the investment. ABC Company reported earnings of $300,000 for the fiscal year ended December 31. Cash dividends were paid during the year in the amount of $20,000.

1. Calculate the investment income and the ending balance in the investment account on the balance sheet for ABC Company on December using the cost method.

2. Calculate the investment income and the ending balance in the investment account on the balance sheet for ABC Company on December 31 using equity method.

Answer rating: 100% (QA)

The answer is as follows The cost method of investment account is a method where the investment is m... View the full answer