Question

Sandhill Company owns 31000 of the 50000 outstanding shares of Taylor, Inc. common stock. During 2021, Taylor earns $1360000 and pays cash dividends of $1080000. If the beginning balance in the investment account was $830000, the balance at December 31, 2021 should be

Answer 1

Answer: $2,312,800

Step-by-step explanation:

From the information given in the question, we can see that Sandhill Company owns 31000 out of 50000 outstanding shares so the equity method can be used.

To calculate the balance at December 31, 2021 goes thus:

= $800,000 + ($1,360,000 × 31000/50000) - ($1,080,000 × 31000/50000)

= $800,000 + ($1,360,000 × 0.62) + ($1,080,000 × 0.62)

= $800,000 + $843,200 + $669,600

= $2,312,800