If Nolte Company acquired a 30% interest in Boswell Company on December 31, 2011 for $67,500 and during 2012 Boswell Company had net income of $25,000 and paid a cash dividend of $10,000, applying the equity method would give a debit balance in the
Investment in Boswell Company account at the end of 2012 of

Question

Quizplus · Accepted Answer

The equity method would give a debit balance in the Investment in Boswell Company account at the end of 2012 of $72,000. This is because Nolte Company would record its share of Boswell Company's net income ($25,000 x 30% = $7,500) as an increase to its investment, and would record its share of Boswell Company's cash dividend ($10,000 x 30% = $3,000) as a decrease to its investment.

If Nolte Company Acquired a 30% Interest in Boswell Company