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On January 1, 2010, Mehan, Incorporated purchased 15,000 shares of Cook Company for $150,000 giving Mehan a 15% ownership of Cook. On January 1, 2011 Mehan purchased an additional 25,000 shares (25%) of Cook for $300,000. This last purchase gave Mehan the ability to apply significant influence over Cook. The book value of Cook on January 1, 2010, was $1,000,000. The book value of Cook on January 1, 2011, was $1,150,000. Any excess of cost over book value for this second transaction is assigned to a database and amortized over five years.Cook reports net income and dividends as follows. These amounts are assumed to have occurred evenly throughout the years:

2010: Net income:200,000. Dividend:50,000
2011: Net income:225,000. Dividend:50,000
2012: Net income:250,000. Dividend:60,000

On April 1, 2012, just after its first dividend receipt, Mehan sells 10,000 shares of its investment.

What is the balance in the investment account at December 31, 2010?

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Accounting Basics, Accounting

Category:- Accounting Basics
Reference No.:- M956828

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