Textbook Problem

On January 2, 2019, Portela Inc. bought 30% of the outstanding common stock of Bracero Corporation for $258,000 cash. Portela accounts for this investment by the equity method. At the date of acquisition of the stock, Bracero’s property, plant, and equipment had a fair value in excess of its book value of $150,000. Bracero’s property, plant, and equipment has a remaining life of 10 years. Bracero’s net income for the year ended December 31, 2019, was $180,000. During 2019, Bracero declared and paid cash dividends of $20,000. On December 31, 2019, Portela should have carried its investment in Bracero in the amount of:

1. a. $258,000
2. b. $301,500
3. c. $306,000
4. d. $312,000