The management of nova industries inc. manufactures gasoline and diesel engines through two production departments, fabrication and assembly. management needs accurate product cost information in order to guide product strategy. presently, the company uses a single plantwide factory overhead rate for allocating factory overhead to the two products. however, management is considering the multiple production department factory overhead rate method. the following factory overhead was budgeted for nova:

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?