Question: On July 1 , 2 0 x 1 , Sanchez Corporation acquired 3 , 0 0 0 shares ( 2 0 % ownership ) of

On July 1,20x1, Sanchez Corporation acquired 3,000 shares (20% ownership) of Beal Corporation common stock at $40 per share plus brokerage fees of $600. The investment of $120,000 was $6,000 greater than 20% of the equity of Beal because inventory was understated by $30,000. Beal reported net income of $270,000 for the year and paid dividends of $2 per share at the end of each quarter. The market value of the Beal shares is $42 per share at December 31,20x1.
Which accounting approach should Sanchez use to report the Beal investment?
Group of answer choices
Cost method
Equity method
Fair value method
Consolidation

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