Barking Power Company Accounts for Its 35% Investment in Pipeline

question 31

Multiple Choice

Barking Power Company accounts for its 35% investment in Pipeline Corporation under the equity method of accounting. The investment was made on January 1, 2020, at a cost of $625,000. Pipeline Corporation reported net income of $85,000 for the year ended December 31, 2020, and paid total dividends of $20,000 during 2020. On December 31, 2020, after making all appropriate entries, the balance in Barking Power Company's Long-Term Investment account will equal:

• A) $647,750
• B) $583,000
• C) $690,000
• D) $602,250

---

Definitions:

Ending Inventory

The value of goods available for sale at the end of an accounting period, calculated through a physical count or accounting methods.

Unit Sales

The quantity of items that have been sold within a particular timeframe.

JIT Policy

Just-In-Time policy, a strategy that aims to improve a business's return on investment by reducing in-process inventory and related carrying costs.

Variable Overhead

Costs that vary with the level of output or production activity, such as materials and labor.