On January 1, 2018, Coastal Corp. purchased 30% of the common shares of Mansbridge Corp. for $600,000. During 2018, Mansbridge Corp. reported net income of $75,000 and paid total cash dividends of $15,000. The balance in the Investment in Associates (Mansbridge) account on Coastal's books at December 31, 2018 is
A) $675,000.
B) $622,500.
C) $618,000.
D) $600,000.

Question

Quizplus · Accepted Answer

Coastal Corp. initially records the investment at cost, $600,000. It then adjusts the investment for its share of Mansbridge's net income (30% of $75,000 = $22,500) and dividends (30% of $15,000 = $4,500). The balance is $600,000 + $22,500 - $4,500 = $618,000.