Final answer:
The net asset amount attributable to Young Co.'s investment in Montana on Young's balance sheet as of December 31, 2008, would be 540,000, which includes the original cost of 500,000 and a fair value adjustment of 40,000.
Step-by-step explanation:
The calculation of the net asset amount attributable to Young Co.'s investment in Montana Co. on Young's balance sheet as of December 31, 2008, involves a few steps. First, identify the initial cost of the investment, which is 500,000 for 20,000 shares, equating to a per-share cost of 25. Second, calculate the dividends received, which at $0.50 per share for 20,000 shares totals 10,000. This dividend income would have been recognized in Young's income statement. Lastly, determine the fair value adjustment by comparing the year-end fair value (27 per share) to the cost. The per-share difference is 27 - 25 = 2, with a total increase in fair value for 20,000 shares being 2 * 20,000 = 40,000.
The net asset amount on the balance sheet would then be the original cost plus the fair value adjustment, which totals 500,000 + 40,000 = 540,000. Note that while Young Co. received dividends which affected its income statement, the dividends do not affect the carrying amount of the investment in the balance sheet under trading securities classification as dividends are considered returns on the investment, not a recovery of cost.