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 partial equity method has been applied?
A) $317,000.
B) $326,000.
C) $359,000.
D) $368,000.
E) $383,000.

Question

Quizplus · Accepted Answer

Under the partial equity method, the investment account is adjusted for the investor's share of the investee's net income and dividends, and amortization. Initial investment: $276,000. Add share of Roberts' net income: $50,000 (2020) + $57,000 (2021) = $107,000. Subtract amortization: $21,000 (2020) + $21,000 (2021) = $42,000. Subtract dividends received: $12,000 (2020) + $12,000 (2021) = $24,000. Calculation: $276,000 + $107,000 - $42,000 - $24,000 = $317,000.