Use the Following Information for Questions 115 Through 117

question 114

Multiple Choice

Use the following information for questions 115 through 117.
Rich, Inc. acquired 30% of Doane Corporation's voting stock on January 1, 2014 for $800,000. During 2014, Doane earned $320,000 and paid dividends of $200,000. Rich's 30% interest in Doane gives Rich the ability to exercise significant influence over Doane's operating and financial policies. During 2015, Doane earned $400,000 and paid dividends of $120,000 on April 1 and $120,000 on October 1. On July 1, 2015, Rich sold half of its stock in Doane for $528,000 cash.
-Before income taxes, what amount should Rich include in its 2014 income statement as a result of the investment?

• A) $320,000.
• B) $200,000.
• C) $96,000.
• D) $60,000.

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Definitions:

Merchandise

Goods that are bought and sold in the normal course of business, typically in a retail or wholesale setting.

Credit

An accounting entry that increases liabilities and equity accounts or decreases assets and expense accounts, recorded on the right side of a ledger.

Defective Goods

Items that fail to meet quality standards due to flaws or faults, rendering them unsaleable or requiring correction.

Credit Terms

Conditions under which credit is extended by a lender to a borrower, including interest rate, repayment schedule, and other terms of a credit agreement.