DEF Company acquired in 2012 a 100% interest in MNO Company by acquiring shares that cost $50,000. In 2012, MNO Company reported income of $10,000 and $8,000 in 2013. MNO Company also paid dividends to DEF Company of $2,000 in 2012 and $ 8,000 in 2013. The balance of DEF Company's investment in MNO Company in its own books if it reflects the investment at cost at December 31, 2012 was:

Question

Quizplus · Accepted Answer

Since DEF Company reflects the investment at cost, the balance remains at the original acquisition cost of $50,000, regardless of MNO's income or dividends paid.

DEF Company Acquired in 2012 a 100% Interest in MNO