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The answer to Balance in Investment Account

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Tess Corp acquires a 25% interest in Gardean Co. on Jan 1, 2004, for $550,000. At that time, Gardean had 1,000,000 shares of its $1 par common stock issued and outstanding. During 2004, Gardean paid cash dividends of $330,000 and thereafter declared and issued a 5% common stock dividend when the market value was $3 per share. Gardean net income for 2004 was $600,000. What should be the balance in Tess's investment account at the end of 2004?

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Solution Summary

The solution explains how to calculate the balance in investment account under equity method.

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Since the interest is 25%, the investment would be accounted under the equity method. In this method the investment account increases by the ...

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