Chapter 1, Problem 9P

Evan Company reports net income of $140,000 each year and declares an annual cash dividend of $50,000. The company holds net assets of $1,200,000 on January 1, 2020. On that date, Shalina purchases 40 percent of Evan’s outstanding common stock for $600,000, which gives it the ability to significantly influence Evan. At the purchase date, the excess of Shalina’s cost over its propor-tionate share of Evan’s book value was assigned to goodwill. On December 31, 2022, what is the Investment in Evan Company balance (equity method) in Shalina’s financial records?

1. $600,000
2. $660,000
3. $690,000
4. $708,000