The Dawson Company uses the equity method to account for its investment in Combs' company. Ignore closing entries recorded on December 31 to close temporary accounts. The Dawson Company ends its fiscal year on December 31 of each year. Dawson amortizes the difference between FMV and BV over 40 year period. What is the Investment balance on Dec. 31, VR12?

Additional Information:

1. On December 31, YR 10, Dawson bought 40% of Combs common stock for $500,000. Total book value of Combs Company was $800,000 on this date.

2. During YR 11, Combs reported $60,000 of net income and paid its shareholders a total of $30,000 of cash dividends.

3. During YR 12, Combs reported a net income of $10,000 and paid its shareholders a total of $5,000 of cash dividends.

Answer rating: 100% (QA)

Lets break down the calculations Initial Investment in Year 10 Dawson bought 40 of Combs common stoc... View the full answer