Use the following information for questions 99 through 102.
The summarized balance sheets of Goebel Company and Dobbs Company as of December 31, 2014 are as follows:
-If Goebel Company acquired a 30% interest in Dobbs Company on December 31, 2014 for $220,000 and during 2015 Dobbs Company had net income of $75,000 and paid a cash dividend of $30,000, applying the equity method would give a debit balance in the Equity Investments (Dobbs) account at the end of 2015 of

Question

Use the following information for questions 99 through 102.
The summarized balance sheets of Goebel Company and Dobbs Company as of December 31, 2014 are as follows: 
-If Goebel Company acquired a 30% interest in Dobbs Company on December 31, 2014 for $220,000 and during 2015 Dobbs Company had net income of $75,000 and paid a cash dividend of $30,000, applying the equity method would give a debit balance in the Equity Investments (Dobbs) account at the end of 2015 of

Quizplus · Accepted Answer

Under the equity method, Goebel Company would initially record its investment in Dobbs Company at the acquisition cost of $220,000. Throughout 2015, Goebel would recognize its share of Dobbs' net income, which is 30% of $75,000 ($22,500), increasing the investment account. It would also decrease the investment account for its share of the dividends paid by Dobbs, which is 30% of $30,000 ($9,000). Therefore, the ending balance would be $220,000 + $22,500 - $9,000 = $233,500.

Use the Following Information for Questions 99 Through 102