Use the Following Information for Questions

question 33

Multiple Choice

Use the following information for questions
Altadore Ltd.acquired 30% of Dorset Corp.'s common shares on January 1, 2011 for $240,000.During 2011, Dorset earned $100,000 and paid dividends of $60,000.Altadore's 30% interest in Dorset gives Altadore the ability to exercise significant influence over Dorset 's operating and financial policies.During 2012, Dorset earned $120,000 and paid dividends of $40,000 on April 1 and $40,000 on October 1.On July 1, 2012, Altadore sold half of its shares in Dorset for
$158,000 cash.
-The carrying amount of this investment in Altadore's December 31, 2011 balance sheet should be

• A)$252,000.
• B)$240,000.
• C)$270,000.
• D)$275,000.

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Definitions:

Residual Income

Residual Income (RI) is the net income an organization generates beyond the minimum rate of return on its investments.

Operating Assets

Assets that are used in the day-to-day operations of a business to generate income, including both current and long-term assets.

Net Operating Income

A financial metric that calculates a company's profitability by subtracting operating expenses from its total revenue, excluding taxes and interest.

Residual Income

The amount of income that an individual has after all personal debts and expenses have been paid.