On January 1, 2014, Dumas Industries Acquired an 18% Interest

question 44

Short Answer

On January 1, 2014, Dumas Industries acquired an 18% interest in Arlongton Corporation through the purchase of 12,000 shares of Arlongton Corporation common stock for $250,000. During 2014, Arlongton Corp. paid $60,000 in dividends and reported a net loss of $90,000. Dumas is able to exert significant influence on Arlongton. However, Dumas mistakenly records these transactions using the cost method rather than the equity method of accounting. Which of the following would show the correct presentation for Dumas's investment using the equity method? $\begin{array}{ll}&\text { Investment }&\text { Net }\\&\text { Account }&\text { Earnings (loss) }\\a.&\$ 90,000 & (\$ 30,000) \\b.&\$ 223,000 & (\$ 16,200) \\c.&\$ 233,800 & (\$ 16,200) \\d.&\$ 233,800 & (\$ 5,400)\end{array}$

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Definitions:

Social Contract

A theory in political philosophy suggesting that people's moral and political obligations are dependent upon a contract or agreement among them to form the society in which they live.