If Goehler applies the equity method in accounting for Kenneth, what is the consolidated balance for the Equipment account as of December 31, 2018?
A) $1,080,000.
B) $1,104,000.
C) $1,100,000.
D) $1,468,000.
E) $1,475,000.

Question

Quizplus · Accepted Answer

Under the equity method, Goehler includes its share of Kenneth's net income or loss and adjusts the investment account accordingly. As of December 31, 2018, Goehler's investment in Kenneth is $624,000 ($600,000 original investment plus $24,000 share of Kenneth's net income). Kenneth's equipment account has a balance of $1,080,000 ($900,000 original balance plus $180,000 in equipment purchases, less $0 in accumulated depreciation), and Goehler's share of that balance is $624,000. Therefore, the consolidated balance for the Equipment account as of December 31, 2018, is $1,104,000 ($480,000 + $624,000).

If Goehler Applies the Equity Method in Accounting for Kenneth