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In January 2017, Domingo, Inc., acquired 20 percent of the outstanding common stock of Martes,...

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Accounting

In January 2017, Domingo, Inc., acquired 20 percent of the outstanding common stock of Martes, Inc., for $889,000. This investment gave Domingo the ability to exercise significant influence over Martes, whose balance sheet on that date showed total assets of $4,808,000 with liabilities of $968,000. Any excess of cost over book value of the investment was attributed to a patent having a remaining useful life of 10 years.

In 2017, Martes reported net income of $225,000. In 2018, Martes reported net income of $276,250. Dividends of $104,000 were declared in each of these two years. What is the equity method balance of Domingos Investment in Martes, Inc., at December 31, 2018?

Multiple Choice

  • $1,060,350.

  • $923,450.

  • $1,048,250.

  • $947,650.

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