On January 4, 2021, Snow Co. purchased 40,000 shares (40%) of the common stock of Walker Corp., paying $900,000. There was no goodwill or other cost allocation associated with the investment. Snow has significant influence over Walker. During 2021, Walker reported income of $240,000 and paid dividends of $75,000. On January 2, 2022, Snow sold 5,000 shares for $125,000. What was the balance in the investment account after the shares had been sold?

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The initial investment was $900,000. Snow's share of Walker's income for 2021 is 40% of $240,000, which is $96,000. Snow's share of the dividends is 40% of $75,000, which is $30,000. The investment account is increased by the income share and decreased by the dividend share, resulting in $966,000 ($900,000 + $96,000 - $30,000). After selling 5,000 shares (12.5% of the 40,000 shares), the investment account is reduced by 12.5% of $966,000, which is $120,750, leaving a balance of $845,250.