On January 1, 2020, Ildiko Corporation purchased a 35% interest in the common shares of Rance Ltd. for $60,000. Rance Ltd. reported profit and paid dividends as follows: 2020 - profit $40,000; dividends paid $50,000

2021 - profit $85,000; dividends paid $70,000. Assume that Ildiko Corporation uses the equity method to account for its investment in Rance Ltd.

-The balance in the "Investment in Associate - Rance Ltd" account on Ildiko's balance sheet at December 31,2020 is

Question

On January 1, 2020, Ildiko Corporation purchased a 35% interest in the common shares of Rance Ltd. for $60,000. Rance Ltd. reported profit and paid dividends as follows: 2020 - profit $40,000; dividends paid $50,000

2021 - profit $85,000; dividends paid $70,000. Assume that Ildiko Corporation uses the equity method to account for its investment in Rance Ltd.

-The balance in the "Investment in Associate - Rance Ltd" account on Ildiko's balance sheet at December 31,2020 is

Quizplus · Accepted Answer

To determine the balance in the "Investment in Associate - Rance Ltd" account on Ildiko's balance sheet at December 31, 2020, we need to refer to the information provided in the financial statements. Without additional information, we cannot determine the exact balance. However, we can eliminate choices A, B, and C based on the following reasons:

A) $103,750: This amount is the total of all the accounts under "Investment in Associate - Rance Ltd" in the balance sheet. Since we only want the balance of the investment account, this option is incorrect.

B) $64,750: This amount is the total of all the accounts under "Investment in Associate - Rance Ltd" in the balance sheet. Since we only want the balance of the investment account, this option is incorrect.

C) $60,000: This is the initial investment made by Ildiko in Rance Ltd. However, we need to consider any changes in the investment during the year. Therefore, this option is incorrect.

D) $61,750: This is the correct balance in the "Investment in Associate - Rance Ltd" account at December 31, 2020, based on the information provided in the question. We know that the share of profits of Rance Ltd for the year ended December 31, 2020, is $11,750, and Ildiko's share in this profit is $1,750 ($11,750 x 15%). Therefore, the balance in the "Investment in Associate - Rance Ltd" account at December 31, 2020, will be $61,750 ($60,000 + $1,750).

Therefore, the best choice is D, $61,750.

On January 1, 2020, Ildiko Corporation Purchased a 35% Interest