Question: On January 1 , 2 0 2 1 , Judd, Inc., purchases 3 5 % of Cosby Corporation for $ 8 0 0 , 0

On January

1, 2021,

Judd, Inc., purchases

35 %

of Cosby Corporation for $

800, 000 .

During the calendar year

2021,

Cosby had net earnings of $

300, 000

and paid dividends of $

30, 000 .

Judd mistakenly recorded these transactions using the fair value method rather than the equity method of accounting. The fair value of the investment at the end of

2021

is $

850, 000 .

What effect would this have on the investment account, net income, and retained earnings, respectively?

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