Jones, Incorporated acquires 15% of Anderson Corporation on January 1, 2020, for $105,000 when the book value of Anderson was $600,000. During 2020 Anderson reported net income of $150,000 and paid dividends of $50,000. On January 1, 2021, Jones purchased an additional 25% of Anderson for $200,000. Any excess cost over book value is attributable to goodwill with an indefinite life. The fair-value method was used during 2020 but Jones has deemed it necessary to change to the equity method after the second purchase. During 2021 Anderson reported net income of $200,000, and reported dividends of $75,000.The balance in the investment account at December 31, 2021, is

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The initial investment in 2020 was $105,000. In 2021, Jones purchased an additional 25% for $200,000, making a total investment of $305,000. Under the equity method, Jones recognizes its share of Anderson's net income and dividends. For 2021, Jones's share of Anderson's net income is 40% of $200,000 = $80,000. Jones's share of dividends is 40% of $75,000 = $30,000. The investment account is adjusted by adding the share of net income and subtracting the share of dividends: $305,000 + $80,000 - $30,000 = $355,000.

Jones, Incorporated Acquires 15% of Anderson Corporation on January 1