On January 1, 2011, Daley Corporation purchased 30% of the ordinary shares outstanding of King Corporation for $600,000.During 2011, King Corporation reported net income of $200,000 and paid cash dividends of $100,000.The balance of the Share Investments-King account on the books of Daley Corporation at December 31, 2011 is

Question

Quizplus · Accepted Answer

The initial investment cost of $600,000 plus Daley Corporation's share of King Corporation's net income of $60,000 ($200,000 x 30%) equals a total balance of $660,000. However, since King Corporation paid cash dividends of $100,000, Daley Corporation's share of dividends is $30,000 ($100,000 x 30%), which reduces the balance to $630,000. Therefore, the correct answer is option B.

On January 1, 2011, Daley Corporation Purchased 30% of the Ordinary