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29 April, 07:21

Madison Corporation purchased 45% of Jay Corporation for $120,000 on January 1. On June 20 of the same year, Jay Corporation declared total cash dividends of $30,000. At year-end, Jay Corporation reported net income of $150,000. The balance in Madison's Equity Method Investments-Jay Corporation account as of December 31 should be:

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  1. 29 April, 08:39
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    The correct answer is $175,500.

    Explanation:

    According to the scenario, the given data are as follows:

    Investment value = $120,000

    Acquisition Dividend = $30,000 * 45% = $12,000

    Net income share = $150,000 * 45% = $67,500

    So, we can calculate the balance amount by using following formula:

    Balance amount = Investment value - Acquisition Dividend + Net income share

    = $120,000 - $12,000 + $67,500

    = $175,500
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