Homework Answers
Percentage of shares acquired = 48,000 / 240,000 = 20%
As there is significant influence, the investment is accounted using the equity method.
Investment = Cost + 20% of Net income - 20% of dividends declared
= $1,296,000 + ($240,000 * 20%) - ($72,000 * 20%)
= $1,296,000 + $48,000 - $14,400
= $1,329,600
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