Problem
In January 2014, Domingo, Inc., acquired 20 percent of the outstanding common stock of Martes, Inc., for $795,000. This investment gave Domingo the ability to exercise significant influence over Martes. Martes's assets on that date were recorded at $4,405,000 with liabilities of $995,000. Any excess of cost over book value of the investment was attributed to a patent having a remaining useful life of 10 years.
In 2014, Martes reported net income of $191,000. In 2015, Martes reported net income of $245,500. Dividends of $119,000 were declared in each of these two years. What is the equity method balance of Domingo's Investment in Martes, Inc., at December 31, 2015?