Reference no: EM132462450

Pinta Company purchased 40% of Snuggie Corporation on January 1, 2017 for $150,000. Snuggie Corporation's balance sheet at the time of acquisition was as follows:

Cash . $30,000 .                                      Current Liabilities . $40,000

Accounts Receivable . 120,000 .                 Bonds Payable . 200,000

Inventory 80,000 .                                    Common Stock 200,000

Land 150,000 .                                        Additional Paid in Capital . 40,000

Buildings & Equipment . 300,000 .                 Retained Earnings 80,000

Less: Acc. Depreciation (120,000)

Total Assets $560,000 .                             Total Liabilities and Equity . $560,000

• During 2017, Snuggie Corporation reported net income of $30,000 and paid dividends of $9,000. The fair values of Snuggie's assets and liabilities were equal to their book values at the date of acquisition, with the exception of Building and Equipment, which had a fair value of $35,000 above book value. All buildings and equipment had a remaining useful life of five years at the time of the acquisition. The amount attributed to goodwill as a result of the acquisition is not impaired.

Required:

Question A. What amount of investment income will Pinta record during 2017 under the equity method of accounting?

Question B. What amount of income will Pinta record during 2017 under the cost method of accounting?

Question C. What will be the balance in the investment account on December 31, 2017 under the cost and equity method of accounting?