Park Company acquired a 90% interest in Southwestern Company on December 31, 2016, for $320,000. During 2017 Southwestern had a net income of $22,000 and paid a cash dividend of $7,000. Applying the cost method would give a debit balance in the Investment in Stock of Southwestern Company account at the end of 2017 of:

Question

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Under the cost method, the investment account remains at the original cost of acquisition, which is $320,000. The net income and dividends of the subsidiary do not affect the investment account balance.

Park Company Acquired a 90% Interest in Southwestern Company on December