Last year, your dealership earned record profits of $1.9 million. in your market, you compete against two other dealers, and the market-level price elasticity of demand for midsized honda automobiles is -1.2. in each of the last five years, your dealership has sold more midsized automobiles than any other honda dealership in the nation. this entitled your dealership to an additional 40 percent off the manufacturer’s suggested retail price (msrp) in each year. taking this into account, your marginal cost of a midsized automobile is $11,000.

On january 2, well co. purchased 10% of rea, inc.’s outstanding common shares for $400,000, which equaled the carrying amount and the fair value of the interest purchased in rea’s net assets. well did not elect the fair value option. because well is the largest single shareholder in rea, and well’s officers are a majority on rea’s board of directors, well exercises significant influence over rea. rea reported net income of $500,000 for the year and paid dividends of $150,000. in its december 31 balance sheet, what amount should well report as investment in rea?