[AlbaNavara]

Benson Corporation purchased 25% of the common stock outstanding of Landon Corporation for $600,000. During the year, Landon Corporation reported net income of $200,000 and paid cash dividends of $80,000. The balance of the Stock Investments – Landon on the books of Benson Corporation at the end of the year is?

600,0000

On January 2, Matthews Corporation acquired 20% of the outstanding common stock of Dennehy Company for $450,000. For the year ended December 31, Dennehy reported net income of $90,000 and paid cash dividends of $30,000 on its common stock. At December 31, the carrying value of Matthews' investment in Dennehy under the equity method is

450,000+30,000x0.20 = 456,000



The difference between those two question is it the first need stock investment balance and the second need carrying value?

[dom.b.fortin]

The difference is that the first uses cost method and the second uses equity method.
Cost method doesn't recognize increases in investment balance but records dividends as Dr. Cash and Cr. Dividend Income.

Equity method on the other hand recognizes movement in investment balance as increases due to share in net income and decreases due to dividends received.
The second answer would be wrong, the answer should be
450,000 + 90,000x.2 -30,000x.2 = 462,000