At the beginning of 20X1, Manowar Ltd. acquired 20% of the voting shares of Cortez Co. for $150,000. Manowar does not have signiﬁcant inﬂuence over Cortez. Manowar reports the investment using the FVTPL method. In 20X1, Cortez earned net income of $70,000 and paid dividends of $40,000. In 20X2, Cortez earned net income of $80,000 and paid dividends of $100,000. At the end of 20X2, what is the balance of Manowar's "Investment in Cortez" account?
A) $152,000
B) $150,150
C) $150,000
D) $172,500

Question

Quizplus · Accepted Answer

Under the FVTPL method, the investment is initially recorded at fair value and subsequently measured at fair value with changes recognized in profit or loss. Since Manowar does not have significant influence, dividends and net income of Cortez do not affect the investment's carrying amount. Therefore, the balance remains at the initial investment amount of $150,000 unless there are changes in fair value, which are not mentioned in the question.

At the Beginning of 20X1, Manowar Ltd