Pendleton Company Acquired a 70% Interest in Sunflower Company on December

question 18

Multiple Choice

Pendleton Company acquired a 70% interest in Sunflower Company on December 31, 2013, for $380,000.During 2014 Sunflower had a net income of $30,000 and paid a cash dividend of $10,000.Applying the cost method would give a debit balance in the Investment in Stock of Sunflower Company account at the end of 2014 of:

• A)$400,000.
• B)$394,000.
• C)$373,000.
• D)$380,000.

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Definitions:

Market Rate of Return

The average rate of return of a specific market or investment over a certain period, reflecting the gains and losses in that market.

Annual Dividend

The total dividend payment a shareholder receives from a company in one year, based on the number of shares owned.

Constant

A value that does not change and remains fixed throughout the calculation or equation in which it appears.

Rate of Return

The yield or downfall in an investment's worth over a given period, formulated as a percentage of the investment's primal cost.