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What is the balance in the investment in innisfail company

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On January 1, 2021, Olds Limited acquired 30,000 (30%) common shares of Innisfail Company at a cost of $895,000. This gave Olds the ability to exercise significant influence over Innisfail's strategic operating and financing policies. The shareholders' equity of Innisfail was $1,230,000 on January 1, 2021. On that date, the net assets had a fair value equal to their net book value with the exception of equipment that had a fair value of $100,000 and a net book value of $30,000. The equipment had a remaining useful on January 1, 2021 of 8 years. For 2021, Innisfail's net income was $150,000 and $22,000 in dividends were declared. There were no goodwill impairment losses in 2021.

Problem 1: Assuming Olds uses the equity method to record its investment in Innisfail, what is the balance in the Investment in Innisfail Company account at December 31, 2021?

Problem 2: Assuming Olds uses the cost method to record its investment in Innisfail, what is the balance in the Investment in Innisfail Company account at December 31, 2021?

Reference no: EM132822465

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