Bloomfield Bakers accounts for its investment in Clor Confectionary under the equity method. Bloomfield carried the Clor investment at $150,000 and $165,000 at December 31 of 2008 and 2009, respectively. During 2009 Clor recognized $80,000 of net income and paid dividends of $30,000. Assuming that Bloomfield owned the same percentage of Clor throughout 2009, their percentage ownership must have been:

Question

Quizplus · Accepted Answer

The equation used to solve for the percentage ownership is: beginning balance + percentage ownership x (net income - dividends) = ending balance. Plugging in the numbers given, we get $150,000 + X%($80,000 - $30,000) = $165,000. Solving for X, we get 30%, which means Bloomfield owned 30% of Clor Confectionary during 2009. Therefore, the correct answer is C.

Bloomfield Bakers Accounts for Its Investment in Clor Confectionary Under