The Master Company acquired a 40% interest in the Dickerson Company on January 2, 2017, for $1,000,000. During 2017, Dickerson Company paid $100,000 in dividends and reported net income of $270,000. At the end of 2017, the balance in Investment in Dickerson Company should be

Question

Quizplus · Accepted Answer

The balance in Investment in Dickerson Company at the end of 2017 is calculated by adding the equity earnings to the initial investment and subtracting any dividends received. The equity earnings are 40% of Dickerson's net income ($270,000 * 40% = $108,000), and the dividends received are $100,000 * 40% = $40,000. Therefore, the ending balance is $1,000,000 + $108,000 - $40,000 = $1,068,000.

The Master Company Acquired a 40% Interest in the Dickerson