[Allison]

On January 2, Year 1, Kean Co. purchased a 30% interest in Pod Co. for $250,000. On this date, Pod’s
stockholders’ equity was $500,000. The carrying amounts of Pod’s identifiable net assets approximated
their fair values, except for land whose fair value exceeded its carrying amount by $200,000. Pod
reported net income of $100,000 for Year 1, and paid no dividends. Kean accounts for this investment
using the equity method. In its December 31, Year 1, balance sheet, what amount should Kean report as
investment in subsidiary?
A. $210,000
B. $220,000
C. $270,000
D. $280,000

Why this question only consider the net income but not the amortization of Fair value more than Net Book value? The journal is Dr. Equity in earning and Cr. Investment in Investee, so it will impact the investment too, why we don’t include it?