(Solution) - GAAP requires firms to account for equity investments in which -(2025 Original AI-Free Solution)

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GAAP requires firms to account for equity investments in which ownership is between 20 and 50 percent using the equity method. Ace Corporation owns 35 percent of Spear Corporation during Year 4. Spear Corporation reported net income of $100.4 million for Year 4, and declared and paid out dividends of $25 million during the year.
1. Calculate the equity income Ace Corporation reports in Year 4 related to its ownership in Spear Corporation.
2. What does Ace Corporation report in its Statement of Cash Flows for Year 4 related to its ownership in Spear Corporation?
3. Assuming that Ace Corporation's balance sheet account, Investment in Spear Corporation, is $1,100 million at the beginning of Year 4, what is the balance in the account at the end of Year 4? Support your answers with calculations.