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    Equity method

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    On January 2, 20X3, Kean Company purchased 30 percent interest in Pod Company for $250,000. On this date, Pod's stockholders' equity was $500,000. The carrying amounts of Pod's identifiable net assets approximated their fair values, except for equipment whose fair value exceeded its carrying amount by $200,000 and had an expected remaining useful life of 15 years at January 2, 20X3. Pod reported net income of $100,000 for 20X3, and paid no dividends. Kean accounts for this investment using the equity method. In its December 31, 20X3, balance sheet, what amount should Kean report as its investment in Pod?
    a. $210,000.
    b. $220,000.
    c. $270,000.
    d. $276,000.

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    Solution Preview

    The initial amount of investment is $250,000.

    This would be increased by the share of net income and decreased by depreciation of assets and dividends
    The share of net income is ...

    Solution Summary

    The solution explains how to determine the balance in the investment account using the equity method.