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Mauve Company owns 10,000 shares of Teal Corporation's stock; Teal currently has 40,000 shares outstanding. During...

Mauve Company owns 10,000 shares of Teal Corporation's stock; Teal currently has 40,000 shares outstanding. During the year, Teal had net income of $200000 and paid out $75,000 in dividends. At the beginning of the year, there was a balance of $153,000 in Mauve's equity method investment in Teal Corporation account. At the end of the year, the balance in this account should be:

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Answer #1

Answer----------$ 184,250

Working

% of holding (10000/40000) 25%
Significant influence present Yes

.

Beginning value of investment account   $ 153,000.00
Add: Portion of Net income of Teal corp (200000 x 25%) $    50,000.00
Less: Dividend received (75000 x 25%) $ (18,750.00)
Balance in Investment account $ 184,250.00
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