Francis, inc. acquired 40% of park's voting stock on january 1, 2020 for $420,000. during 2020, park earned $120,000 and paid dividends of $60,000. during 2021, park earned $160,000 and paid dividends of $50,000 on april 1 and $40,000 on december 1. on july 1, 2021, francis sold half of its stock in park for $275,000 cash. the equity investment balance at december 31, 2020 is: a. $420,000b. $444,000c. $408,000d. $492,000

correct answer is b. $444,000

Explanation:

given data

acquired = 40%

voting stock = $420,000

2020 Park earned =  $120,000

2021 Park earned =  $160,000

paid dividends = $50,000

paid dividends = $40,000

sold half of its stock in Park = $275,000

solution

we get here Balance at December 31 2020 that is express as

Balance at December 31  = Acquisition price  +  share in net income-share in dividend   1

put here value we get

Balance at December 31  =  420000 + (120000 × 0.4) - (60000 × 0.4)

Balance at December 31  = 444000

so correct answer is b. $444,000

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