Parris Corporation purchased 40% of Samitz Corporation for $100,000 on January 1. On November 17 of the same year, Samitz Corporation declared total cash dividends of $12,000. At year-end, Samitz Corporation reported net income of $60,000. The balance in the Parris Corporation's Long-Term Investment-Samitz account at December 31 should be:

Question

Quizplus · Accepted Answer

Parris Corporation's investment in Samitz Corporation would increase by its share of Samitz's net income and decrease by the dividends received. Parris owns 40% of Samitz, so it would recognize 40% of the $60,000 net income, which is $24,000. It would also receive 40% of the $12,000 dividends, which is $4,800. The investment account would be adjusted as follows: $100,000 initial investment + $24,000 (share of net income) - $4,800 (share of dividends) = $119,200.

Parris Corporation Purchased 40% of Samitz Corporation for $100,000 on January