Pagoli Corporation acquires 30% of the outstanding voting common shares of the Inform Corporation for $600,000.Pagoli Corporation acquires the investment in Inform Corporation by buying previously issued shares of Inform Corporation from other investors. Between the time of the acquisition and the end of Pagoli Corporation's next accounting period, Inform Corporation reports earnings of $80,000; and pays a dividend of $30,000 to holders of its common stock.
Inform Corporation reports earnings of $100,000 and pays dividends of $40,000 during the subsequent accounting period.
Pagoli Corporation's Investment in Stock of Inform Corporation account now has a balance of:

Question

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Pagoli Corporation's investment is accounted for using the equity method since it owns 30% of Inform Corporation. The initial investment is $600,000. For the first period, Pagoli's share of Inform's earnings is 30% of $80,000, which is $24,000, and its share of dividends is 30% of $30,000, which is $9,000. The investment account is increased by the earnings share and decreased by the dividend share, resulting in $600,000 + $24,000 - $9,000 = $615,000. For the subsequent period, Pagoli's share of earnings is 30% of $100,000, which is $30,000, and its share of dividends is 30% of $40,000, which is $12,000. The investment account is adjusted again: $615,000 + $30,000 - $12,000 = $633,000.

Pagoli Corporation Acquires 30% of the Outstanding Voting Common Shares