Balance in Investment Account: Tess Corp Example

Tess Corp acquires a 25% interest in Gardean Co. on Jan 1, 2004, for $550,000. At that time, Gardean had 1,000,000 shares of its $1 par common stock issued and outstanding. During 2004, Gardean paid cash dividends of $330,000 and thereafter declared and issued a 5% common stock dividend when the market value was $3 per share. Gardean net income for 2004 was $600,000. What should be the balance in Tess's investment account at the end of 2004?

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...tionate share of net income and decreases by the dividend amount. The 5% stock dividend does not change the 25% holding since all shareholders get ...