Bharrat Corporation purchased 40% of Ferris Corporation for $100,000 on January 1.On October 17 of the same year,Ferris Corporation declared total cash dividends of $12,000.At year-end,Ferris Corporation reported net income of $60,000.The balance in the Bharrat Corporation's Long-Term Investment-Ferris account at December 31 should be:
A)$80,800.
B)$100,000.
C)$95,200.
D)$119,200.
E)$124,000.

Question

Quizplus · Accepted Answer

Bharrat Corporation's share of Ferris Corporation's net income is 40% of $60,000, which is $24,000. The dividends received are 40% of $12,000, which is $4,800. The investment account is adjusted by adding the share of net income and subtracting the dividends received: $100,000 + $24,000 - $4,800 = $119,200.

Bharrat Corporation Purchased 40% of Ferris Corporation for $100,000 on January