On December 31, 2015, East Company acquired 45% of Yellow Company's common stock for $3.0 million. In 2016, the fair value of East's investment in Yellow Company increased to $3.7 million. On December 31, 2016, Yellow declared net income of $800,000. It also paid its stockholders a dividend of 20% of its 2016 income.
A. How would you classify East Company's investment in Yellow Company? Explain.
B. What will East report on its income statement for the investment in Yellow for 2016?
C. What will be the ending balance of East's Investment account on December 31, 2016?

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The Answer of On December 31, 2015, East Company acquired 45% of Yellow Company's common stock for $3.0 million. In 2016, the fair value of East's investment in Yellow Company increased to $3.7 million. On December 31, 2016, Yellow declared net income of $800,000. It also paid its stockholders a dividend of 20% of its 2016 income.
A. How would you classify East Company's investment in Yellow Company? Explain.
B. What will East report on its income statement for the investment in Yellow for 2016?
C. What will be the ending balance of East's Investment account on December 31, 2016?

On December 31, 2015, East Company Acquired 45% of Yellow