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:

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 increased by the share of net income and decreased by the dividends received: $100,000 + $24,000 - $4,800 = $119,200.

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