Use the following information for questions 103 and 104.
Blanco Company purchased 200 of the 1,000 outstanding shares of Darby Company's common stock for $450,000 on January 2, 2015. During 2015, Darby Company declared dividends of $75,000 and reported earnings for the year of $300,000.
-If Blanco Company used the fair value method of accounting for its investment in Darby Company, its Equity Investment (Darby) account on December 31, 2015 should be

Question

Quizplus · Accepted Answer

When using the fair value method, the equity investment account is adjusted to fair value at the end of each reporting period. Since there is no information provided on changes in the fair value of the investment, the account balance should remain at its initial cost of $450,000. The dividends and earnings reported by Darby Company do not affect the equity investment account.

Use the Following Information for Questions 103 and 104