On January 1, 2021, American Corporation purchased 30% of the outstanding voting shares of Short Supplies common stock for $231,000 cash. On that date, Short's book value and fair value were both $770,000. The equity method is deemed appropriate for this investment. Short's net income reported on December 31, 2021, was $73,000. During 2021, Short also paid cash dividends in the amount of $20,500.
On January 1, 2021, American Corporation purchased 30% of the outstanding voting shares of Short Supplies common stock for $231,000 cash. On that date, Short's book value and fair value were both $770,000. The equity method is deemed appropriate for this investment. Short's net income reported on December 31, 2021, was $73,000. During 2021, Short also paid cash dividends in the amount of $20,500.
Cornerstones of Financial Accounting
4th Edition
ISBN:9781337690881
Author:Jay Rich, Jeff Jones
Publisher:Jay Rich, Jeff Jones
ChapterA2: Investments
Section: Chapter Questions
Problem 25E
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On January 1, 2021, American Corporation purchased 30% of the outstanding voting shares of Short Supplies common stock for $231,000 cash. On that date, Short's book value and fair value were both $770,000. The equity method is deemed appropriate for this investment. Short's net income reported on December 31, 2021, was $73,000. During 2021, Short also paid cash dividends in the amount of $20,500.
Required:
Compute the amount that would be reported for the investment on American Corporation's financial statements at December 31, 2021.
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