What is the balance in the investment account at december

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Question - On January 1, 2020, X Company purchased 25% (25,000 shares) for $250,000 of the outstanding common shares of Y Company but was unable to obtain significant influence over Y as 8 members of the Board of Directors were from companies other than the X Company. The shares of X were trading at $10.00/share at this time. On September 1st. 2020, X purchased another 35% (35,000 shares) for $385,000 of the Y Company and thereby obtained voting control over the Y Company. Y appointed 7 members to the Board of Directors. The shares of Y were trading at $12.00/share at this time and $14/share at the year end. Y reported Net Income of $120,000 for the year and paid dividends of $60,000 for the year. The income and dividends were earned and paid evenly over the year.

If X used the cost method to record the investment what is the balance in the investment account at December 31st. 2020?

If X switched to recording the investment in Y as of September 1st. 2020, what is the balance in the investment account at December 31st., 2020?

Reference no: EM133018696

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