On January 1, 2010, Dawson, Incorporated, paid $100,000 for a 30% interest in Sacco Corporation. This investee had assets with a book value of $550,000 and liabilities of $300,000. A patent held by Sacco having a book value of $10,000 was actually worth $40,000 with a six year remaining life. Any goodwill associated with this acquisition is considered to have an indefinite life. During 2010, Sacco reported income of $50,000 and paid dividends of $20,000 while in 2011 it reported income of $75,000 and dividends of $30,000. Assume Dawson has the ability to significantly influence the operations of Sacco. The balance in the investment in Sacco account at December 31, 2011, is

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The initial investment is $100,000. The excess payment for the patent is $30,000 ($40,000 - $10,000), which is amortized over 6 years, resulting in $5,000 per year. For 2010, the share of income is $15,000 (30% of $50,000), and dividends reduce the investment by $6,000 (30% of $20,000). For 2011, the share of income is $22,500 (30% of $75,000), and dividends reduce the investment by $9,000 (30% of $30,000). Amortization for 2010 and 2011 is $10,000 ($5,000 each year). The balance is $100,000 + $15,000 - $6,000 + $22,500 - $9,000 - $10,000 = $112,500. However, the correct calculation should include the initial excess payment, leading to $119,500.

On January 1, 2010, Dawson, Incorporated, Paid $100,000 for a 30