On January 1, 2017, the Leaf Company Acquired a 5

question 109

Multiple Choice

On January 1, 2017, the Leaf Company acquired a 5% interest in the Trunk Corporation through the purchase of 100,000 shares of Trunk's common stock for $640,000; the investment is recorded on Leaf's books as trading securities. During 2017, Trunk paid $40,000 in dividends and reported net income of $100,000. The market price of Trunk's common stock was $6.20 per share on December 31, 2017. Leaf should report the investment in the Trunk Corporation on its December 31, 2017, balance sheet at

• A) $620,000.
• B) $627,000.
• C) $640,000.
• D) $645,000.

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Definitions:

Savings

The portion of disposable income not spent on consumption of goods and services, set aside for future use or emergencies.

Investment Funds

Pools of capital from multiple investors used to collectively purchase securities while each investor retains ownership and control of their own shares.

Demand

In economics, demand is the quantity of a good or service that consumers are willing and able to purchase at various prices during a certain period of time.

Great Recession

A severe global economic downturn that began in 2007 and lasted until about 2009, marked by significant declines in the housing market, financial failures, and a surge in unemployment rates.