On January 4, 2021, Snow Co. purchased 40,000 shares (40%) of the common stock of Walker Corp., paying $900,000. There was no goodwill or other cost allocation associated with the investment. Snow has significant influence over Walker. During 2021, Walker reported income of $240,000 and paid dividends of $75,000. On January 2, 2022, Snow sold 5,000 shares for $125,000. What was the balance in the investment account after the shares had been sold

[tex]\rm\ Investment \rm\ income \rm\ of \rm\ Company \rm\ S =\rm\ Cost \rm\ of \rm\ shares+ \rm\ Share \rm\ in \rm\ profits - \rm\ Share \rm\ in \rm\ Dividends\\\rm\ Investment \rm\ income \rm\ of \rm\ Company \rm\ S=\$900,000+\$96,000-\$30,000\\\rm\ Investment \rm\ income \rm\ of \rm\ Company \rm\ S=\$966,000[/tex]

Given values for step 2:

Number of shares sold: 5,000

Number of shares owned : 40,000

investment value (refer Step-1): $966,000

Step-2 Computation of investment value after the sale of shares :

[tex]\rm\ Investment \rm\ value \rm\ after \rm\ sale \rm\ of \rm\ shares=\frac{\rm\ Number \rm\ of \rm\ shares \rm\ sold}{\rm\ Number \rm\ of \rm\ shares \rm\ owned } \times\ \rm\ Investment \rm\ value\\\rm\ Investment \rm\ value \rm\ after \rm\ sale \rm\ of \rm\ shares=\frac{5,000}{40,000} \times\ \$ 966,000\\\rm\ Investment \rm\ value \rm\ after \rm\ sale \rm\ of \rm\ shares=\$120,750[/tex]

Given values for step 3:

Investment value of Company S:$966,000

Investment value after shares sale:$120,750

Step-3 Computation of balance in investment value:

[tex]\rm\ Balance \rm\ of \rm\ investment = \rm\ Investment \rm\ value \rm\ of \rm\ Company \rm\ S - \rm\ Investment \rm\ value \rm\ after \rm\ shares \rm\ sale\\\rm\ Balance \rm\ of \rm\ investment =\$966,000-\$120,750\\\rm\ Balance \rm\ of \rm\ investment=\$845,250[/tex]

Therefore, after selling the shares, the amount of investment comes out to be $845,250.

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