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Fossil Company purchased 200 of the 1,000 outstanding shares of Ericksen Company's common shares for $60,000 on January 2, 2011.During 2011, Ericksen Company declared dividends of
$10,000 and reported earnings for the year of $40,000.
-If Fossil Company uses the cost model of accounting for its investment in Ericksen Company, its Investment in Ericksen Company account on December 31, 2011 should be

Question

Use the following information for questions 
Fossil Company purchased 200 of the 1,000 outstanding shares of Ericksen Company's common shares for $60,000 on January 2, 2011.During 2011, Ericksen Company declared dividends of
$10,000 and reported earnings for the year of $40,000.
-If Fossil Company uses the cost model of accounting for its investment in Ericksen Company, its Investment in Ericksen Company account on December 31, 2011 should be

Quizplus · Accepted Answer

Under the cost model, the investment is recorded at its purchase cost and is not adjusted for the investee's earnings or dividends. Therefore, the investment remains at $60,000.

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