On January 1, 2015, HJ paid $600,000 for 20,000 shares of MN's common shares, which represents a 15 percent investment in MN. HJ does not have the ability to exercise significant influence over MN. MN declared and paid a dividend of $1 a share to its stockholders during 2015. MN reported net income of $520,000 for the year ended December 31, 2015. The balance in HJ's balance sheet account "Investment in MN" at December 31, 2001 under the cost method, should be:

Question

Quizplus · Accepted Answer

Under the cost method, the investment is recorded at cost and is not adjusted for the investee's income or losses. Dividends received are recognized as income. Therefore, the balance in HJ's "Investment in MN" account remains at the initial cost of $600,000.

On January 1, 2015, HJ Paid $600,000 for 20,000 Shares