Clayton Inc. purchased 30% of the outstanding common stock of Austin Industries on January 1, 2014, for $180,000. Austin reported net income of $70,000 for 2014 and declared and paid cash dividends on common stock of $30,000.
The amount of Clayton's investment in Austin on December 31, 2014, should be _____.
Investment using equity method
Investment using equity method treats share in net income as an addition to the balance of the investment and treats the dividends as reduction to the balance.
Answer and Explanation:
The amount of Clayton's investment in Austin on December 31, 2014, should be $171,000
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from Finance 305: Risk ManagementChapter 3 / Lesson 3