On January 1, 2018, American Corporation purchased 25% of the outstanding voting shares of Short Supplies common stock for $210,000 cash. On that date, Short's book value and fair value were both $840,000. The equity method is deemed appropriate for this investment. Short's net income reported on December 31, 2018, was $80,000. During 2018, Short also paid cash dividends in the amount of $24,000.
Required:
Compute the amount that would be reported for the investment on American Corporation's financial statements at December 31, 2018.

Question

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The Answer of On January 1, 2018, American Corporation purchased 25% of the outstanding voting shares of Short Supplies common stock for $210,000 cash. On that date, Short's book value and fair value were both $840,000. The equity method is deemed appropriate for this investment. Short's net income reported on December 31, 2018, was $80,000. During 2018, Short also paid cash dividends in the amount of $24,000.
Required:
Compute the amount that would be reported for the investment on American Corporation's financial statements at December 31, 2018.

On January 1, 2018, American Corporation Purchased 25% of the Outstanding