Problem:

Evan Company reports net income of $231,000 each year and declares an annual cash dividend of $140,000. The company holds net assets of $1,910,000 on January 1, 2014. On that date, Shalina purchases 40 percent of the outstanding stock for $945,000, which gives it the ability to significantly influence Evan. At the purchase date, the excess of Shalinas cost over its proportionate share of Evans book value was assigned to goodwill.

Required:

Question: On December 31, 2016, what is the Investment in Evan Company balance (equity method) in Shalinas financial records?

• $1,166,200.
• $1,054,200.
• $1,222,200.
• $1,129,800.

Note: Be sure to show how you arrived at your answer.