On January 1, 2013, Cornwall Corp purchased 25% of the common shares of London Corp for $400,000. During 2013, London Corp reported profits of $60,000 and paid total cash dividends of $12,000. The balance in the Investment in Associates (London) account on Cornwall's books at December 31, 2013 is
A)$460,000.
B)$415,000.
C)$412,000.
D)$400,000.

Question

Quizplus · Accepted Answer

The balance in the Investment in Associates (London) account on Cornwall's books at December 31, 2013 is $412,000. This is calculated as follows:Initial investment: $400,000Share of London Corp's profits (25% x $60,000): $15,000Share of London Corp's dividends (25% x $12,000): $3,000Balance at December 31, 2013: $400,000 + $15,000 + $3,000 = $412,000

On January 1, 2013, Cornwall Corp Purchased 25% of the Common