On January 1, 2010, Danforth Company Purchased 30% of the Common

question 2

Multiple Choice

On January 1, 2010, Danforth Company purchased 30% of the common stock of Farley Company for $80, 000.The purchase was made at book value.Additional information for Farley Company follows: $\begin{array}{rrr}\text { Year } & \text { Net Income } & \text { Dividends Paic }\\2010 & \$ 20,000 & \$ 24,000 \\2011 & 60,000 & 42,000\end{array}$
On Danforth's books, what would be the balance of Investment in Farley Company at December 31, 2011?

• A)$104, 000
• B)$ 63, 400
• C)$ 84, 200
• D)$ 60, 200

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Definitions:

Calls

A financial instrument giving the holder the right, but not the obligation, to buy an asset at a specified price within a specific period.

Period Cost

Costs that are not directly associated with the production of goods and are expensed in the period they are incurred, such as administrative and selling expenses.

Variable Cost

Charges that adjust according to the volume of goods produced or sold, specifically materials and labor costs.

Opportunity Cost

The foregone benefit that could have been achieved from options not chosen when selecting one among several alternatives.