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

    Solution Summary

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