Haystack, Inc

question 45

Multiple Choice

Haystack, Inc. owns 30% of the outstanding stock of Hallmark, Inc. and accordingly uses the equity method to account for its investment. The stock was purchased on January 1, 2015 for $880,000. During the year ended December 31, 2015, Hallmark, Inc. reported the following:Dividends declared and paid $ 400,000Net income 2,400,000Haystack, Inc. uses the FIFO method for costing its inventories, while Hallmark, Inc. uses the LIFO method to conform with other companies in its industry. Haystack, Inc. determines that if Hallmark, Inc. had used the FIFO method, its income would have been $350,000 higher during 2015. What is the balance in the Investment in Hallmark, Inc. that will be reported on Haystack, Inc.'s balance sheet at December 31, 2015 assuming Haystack, Inc. follows IFRS for its external financial reporting?

• A) $1,825,000
• B) $1,480,000
• C) $1,585,000
• D) $1,375,000

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Definitions:

Insulin Production

The process by which the pancreas generates insulin, a hormone essential for regulating blood glucose levels.

Juxtaglomerular Cell

A cell located near the glomerulus of the kidney that helps to regulate blood pressure by secreting renin.

Aldosterone

A steroid hormone produced by the adrenal glands that regulates sodium and potassium balance in the blood.

Renin

An enzyme secreted by the kidneys that helps regulate blood pressure by activating the angiotensinogen to angiotensin conversion.