An investor company owns 40% of the outstanding common stock of an investee company, which allows the investor to exercise significant influence over the investee. The Equity Investment was reported at $650,000 as of the end of the previous year. During the year, the investor received dividends of $70,000 from the investee. The investee reports the following income statement for the year:
| Revenues | $2,300,000 | |
| Expenses |
1,800,000 |
|
| Net income |
500,000 |
|
| Other comprehensive income |
100,000 |
|
| Comprehensive income |
$600,000 |
a. How much equity income should the investor report in its net income (i.e., as part of the current year income statement)?
b. What amount should the investor report for the Equity Investment in its balance sheet at the end of the year?
