On January 1, 2016, Toppers Corp.purchased 25% of the common shares of Great Lakes Corp.for $400,000.During 2016, Great Lakes Corp.reported profits of $60,000 and paid total cash dividends of $12,000.The balance in the Investment in Associates (Great Lakes) account on Toppers' books at December 31, 2016 is
A)$460,000.
B)$415,000.
C)$412,000.
D)$400,000.

Question

Quizplus · Accepted Answer

The balance in the Investment in Associates (Great Lakes) account on Toppers' books at December 31, 2016, will be the initial investment of $400,000 plus Toppers' share of Great Lakes Corp.'s profits of $60,000 (25% x $60,000 = $15,000) minus Toppers' share of dividends paid by Great Lakes Corp. of $12,000 (25% x $12,000 = $3,000). Therefore, the balance in the Investment in Associates (Great Lakes) account on Toppers' books at December 31, 2016, is $412,000 ($400,000 + $15,000 - $3,000).