Falcon, Inc. acquired 30% of Dodson Corporation for $100,000 on December 31, 2009. During the calendar year 2010, Dodson had net earnings of $400,000 and paid total dividends of $50,000. The fair value of Dodson Corporation's stock at yearend was $160,000. Falcon mistakenly recorded these transactions using the fair value method (available-for-sale classification) rather than the equity method of accounting.
A. Determine the effect the error would have on the investment account at December 31, 2010.
B. Determine the effect the error would have on net income for the year ending December 31, 2010.

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The Answer of Falcon, Inc. acquired 30% of Dodson Corporation for $100,000 on December 31, 2009. During the calendar year 2010, Dodson had net earnings of $400,000 and paid total dividends of $50,000. The fair value of Dodson Corporation's stock at yearend was $160,000. Falcon mistakenly recorded these transactions using the fair value method (available-for-sale classification) rather than the equity method of accounting.
A. Determine the effect the error would have on the investment account at December 31, 2010.
B. Determine the effect the error would have on net income for the year ending December 31, 2010.