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15 January, 08:03

Myers Company acquired a 60% interest in Gannon Corporation on December 31, 2020 for $1,775,000. During 2021, Gannon had net income of $1,000,000 and paid cash dividends of $250,000. At December 31, 2021, the balance in the equity investment account should be

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  1. 15 January, 10:54
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    The answer is $2,225,000

    Explanation:

    Cost of acquisition is $1,775,000

    Meyer company's share of net income in Gannon corporation:

    60% of $1,000,000

    0.6 x $1,000,000

    = $600,000

    Meyer company's share from cash dividend in Gannon corporation

    60% of $250,000

    0.6 x $250,000

    = $150,000

    The balance in the equity investment account at December 31, 2021 should be:

    $1,775,000 + $600,000 - $150,000

    = $2,225,000
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