On January 1, 20X9, Timber Company acquired 25% of Johnson Company's common stock at underlying book...

On January 1, 20X9, Timber Company acquired 25% of Johnson Company's common stock at underlying book value of $200,000. Johnson reported net income of $270,000 for 20X9 and paid total dividends of $140,000. Timber uses the equity method to account for this investment.

What amount would be reported by Timber Company as the balance in its investment account on December 31, 20X9?

A. $200,000

B. $220,500

C. $232,500

D. $255,500

*Please show your computations for the answer.

Expert Solution

Calculate ending balance of investment

Beginning balance of investment	200000
Add: Net income	67500
Less: Dividend	-35000
Ending balance of investment	232500

So answer is c) $232500

ekkarill92 answered 2 years ago

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On January 1, 20X9, Timber Company acquired 25% of Johnson Company's common stock at underlying book...

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