Myers Company acquired a 60% interest in Gannon Corporation on December 31, 2014 for $1,575,000. During 2015, Gannon had net income of $1,000,000 and paid cash dividends of $250,000. At December 31, 2015, the balance in the investment account should be

Question

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To find the balance in the investment account, we need to calculate the share of net income and dividends received by Myers Company during 2015. Since Myers Company acquired a 60% interest in Gannon Corporation, it is assumed that they are holding significant influence over Gannon's decisions and operations. Therefore, Myers Company should use the equity method to account for its investment in Gannon Corporation.

Calculation of Myers Company's share of net income:
Share of net income = 60% x $1,000,000 = $600,000

Calculation of Myers Company's share of dividends received:
Share of dividends received = 60% x $250,000 = $150,000

Calculation of balance in the investment account at December 31, 2015:
Initial investment amount = $1,575,000
Add share of net income = $600,000
Less share of dividends received = ($150,000)
Balance in investment account = $2,025,000

Therefore, the correct answer is C) $2,025,000.

Myers Company Acquired a 60% Interest in Gannon Corporation on December