On January 2, 2017, Pfizer Co. purchased 22% of Wiley Company's voting stock for $150,000. During 2017, Wiley recorded income of $102,000 and paid total dividends of $27,000. Pfizer uses the equity method to account for this investment. What is the December 31, 2017, balance sheet value of its long-term equity investment in Wiley?

Question

Quizplus · Accepted Answer

Beginning balance of investment= $150,000 
Share of income = 22% x $102,000 = $22,440 
Share of dividends = 22% x $27,000 = $5,940 
Ending balance of investment = Beginning balance + Share of income - Share of dividends 
= $150,000 + $22,440 - $5,940 = $166,500. Therefore, the answer is (D).