Problem:
On January 4, 2013, Watts Co. purchased 40,000 shares (40%) of the common stock of Adams Corp., paying $800,000. There was no goodwill or other cost allocation associated with the investment. Watts has significant influence over Adams. During 2013, Adams reported income of $200,000 and paid dividends of $80,000. On January 2, 2014, Watts sold 5,000 shares for $125,000.
Required:
Question: What was the balance in the investment account after the shares had been sold?
- $848,000.
- $742,000.
- $723,000.
- $761,000.
- $925,000.
Note: Please show how you came up with the solution.