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Zen Company accounting problem

Zen Company reports net income of $140,000 each year and pays an annual cash dividend of $50,000. The company holds net assets of $1,200,000 on January 1, 2001. On that date, Werry Co. purchases 40 percent of the outstanding stock for $600,000, which gives Werry the ability to significantly influence Zen. At the purchase date, goodwill was assigned a useful life of 20 years. On December 31, 2003, what is the Investment in Zen balance in Werry's financial records?

Purchase Price of Zen Stock 600,000
Book Value of Zen Stock ($1,200,000 x 40%) -480,000
Goodwill 120,000
Life of Goodwill 20 years
Annual Amortization (for 2001 only) 6,000

Cost of January 1, 2001 600,000
2001 Income Accrued ($140,000 x 40%) 56,000
2001 Amortization (above) -6,000
2002 Dividend Collected ($50,000 x 40%) -20,000
2002 Income Accrued ($140,000 x 40%) 56,000
2002 Amortization 0
2002 Dividend Collected ($50,000 x 40%) -20,000
2003 Income Accrued ($140,000 x 40%) 56,000
2003 Amortization (above) 0
2003 Dividend Collected ($50,000 x 40%) -20,000
Investment in Zen, 12/31/03 702,000

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