Pacer Company purchased 300 of the 1,000 outstanding shares of Queen Company's common stock for $80,000 on January 2, 2019. During 2020, Queen Company declared dividends of $8,000 and reported earnings for the year of $20,000. If Pacer Company uses the equity method of accounting for its investment in Queen Company, its Investment in Queen Company account at December 31, 2020 should be

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Under the equity method, the investment account is adjusted for the investor's share of the net income and dividends declared by the investee. The investor's share of net income is calculated by multiplying the investee's net income by the percentage of ownership. In this case, Pacer has a 30% ownership (300/1,000 shares), so its share of net income is $20,000 x 30% = $6,000. The investment account is also reduced by the dividends received, which is $8,000 x 30% = $2,400. Therefore, the investment in Queen Company account at December 31, 2020 should be $80,000 + $6,000 - $2,400 = $83,600.

Pacer Company Purchased 300 of the 1,000 Outstanding Shares of Queen