On January 1 2017 Dumas Industries Acquired a 18% Interest $\begin{array}{l}&&\text { Investment Net }\\& \text { Account } & \text { Earnings (loss) } \\\end{array}$

question 86

Short Answer

On January 1 2017 Dumas Industries acquired a 18% interest in Arlongton Corporation through the purchase of 12000 shares of Arlongton Corporation common stock for $250000. During 2017 Arlongton Corp. paid $60000 in dividends and reported a net loss of $90000. 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? $\begin{array}{l}&&\text { Investment Net }\\& \text { Account } & \text { Earnings (loss) } \\\end{array}$
A) $\begin{array}{l}& \$ 90,000 && ( \$ 30,000 ) \\\end{array}$
B) $\begin{array}{l}& \$ 223,000 && ( \$ 16,200 ) \\\end{array}$
C) $\begin{array}{l}& \$ 233,800 && ( \$ 16,200 ) \\\end{array}$
D) $\begin{array}{l} & \$ 233,800 && ( \$ 5,400 )\end{array}$

• A)\(\begin{array}{l}& \$ 90,000 && ( \$ 30,000 ) \\\end{array}\)
• B)\(\begin{array}{l}& \$ 223,000 && ( \$ 16,200 ) \\\end{array}\)
• C)\(\begin{array}{l}& \$ 233,800 && ( \$ 16,200 ) \\\end{array}\)
• D)\(\begin{array}{l} & \$ 233,800 && ( \$ 5,400 )
• \end{array}\)

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Definitions:

Like Terms

Algebraic terms that have the same variable parts and powers.

Collect

Refers to gathering or bringing things together from multiple sources.

Like Terms

Terms in an algebraic expression that have the same variables raised to the same power, which can be combined or simplified.

Operation Indicated

The process of performing the mathematical operation (such as addition, subtraction, multiplication, or division) as specified by the given problem.