On January 1 2017 Gene Corp. paid $800000 for 100000 shares of Onofine Company's common stock which represents 30% of Onofine's outstanding common stock. Onofine reported net income of $200000 and paid cash dividends of $60000 during 2017. Gene should report the investment in Onofine Company on its December 31 2017 balance sheet at:

Question

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Gene Corp. should use the equity method since it owns 30% of Onofine. The initial investment is $800,000. Gene's share of Onofine's net income is 30% of $200,000, which is $60,000. Gene's share of dividends is 30% of $60,000, which is $18,000. The investment is reported at $800,000 + $60,000 - $18,000 = $842,000.