ALC Corporation paid $300,000 to purchase 40% of the outstanding shares of XYZ Corporation.XYZ's balance sheet showed shareholders' equity accounts totalling $700,000.The current market value of XYZ's net assets is $710,000.ALC's 40% investment in XYZ Corporation shares should be recorded at:

Question

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ALC Corporation's investment in XYZ Corporation should be recorded at the actual amount paid for the shares, which is $300,000, regardless of the book value or current market value of XYZ's net assets.

ALC Corporation Paid $300,000 to Purchase 40% of the Outstanding