On January 1, 2011, Deuce Inc. acquired 15% of Wiz Co.'s outstanding common stock for $62,400 and categorized the investment as an available-for-sale security. Wiz earned net income of $96,000 in 2011 and paid dividends of $36,000. On January 1, 2012, Deuce bought an additional 10% of Wiz for $54,000. This second purchase gave Deuce the ability to significantly influence the decision making of Wiz. During 2012, Wiz earned $120,000 and paid $48,000 in dividends. As of December 31, 2012, Wiz reported a net book value of $468,000. For both purchases, Deuce concluded that Wiz Co.'s book values approximated fair values and attributed any excess cost to goodwill. On Deuce's December 31, 2012 balance sheet, what balance was reported for the Investment in Wiz Co. account?

Question

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Deuce Inc. initially recorded the investment at cost ($62,400 + $54,000 = $116,400). After gaining significant influence, Deuce uses the equity method. For 2012, Deuce's share of Wiz's income is 25% of $120,000 = $30,000, and its share of dividends is 25% of $48,000 = $12,000. The investment account is adjusted by adding the share of income and subtracting the share of dividends: $116,400 + $30,000 - $12,000 = $134,400. The initial investment of $62,400 is adjusted for 2011's share of income (15% of $96,000 = $14,400) and dividends (15% of $36,000 = $5,400): $62,400 + $14,400 - $5,400 = $71,400. Adding the 2012 adjustments gives $71,400 + $54,000 + $30,000 - $12,000 = $143,400.