Vaughn Inc. acquired all of the outstanding common stock of Roberts Co. on January 1, 2020, for $276,000. Annual amortization of $21,000 resulted from this acquisition. Vaughn reported net income of $80,000 in 2020 and $60,000 in 2021 and paid $24,000 in dividends each year. Roberts reported net income of $50,000 in 2020 and $57,000 in 2021 and paid $12,000 in dividends each year. What is the Investment in Roberts Co. balance on Vaughn's books as of December 31, 2021, if the initial value method has been applied?
A) $276,000.
B) $317,000.
C) $359,000.
D) $368,000.
E) $383,000.

Question

Quizplus · Accepted Answer

Under the initial value method, the investment remains at its original cost, which is $276,000, and is not adjusted for the subsidiary's income, dividends, or amortization.