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Borgin Inc

question 33

Multiple Choice

Borgin Inc. owns 30% of the outstanding voting common stock of Burkes Co. and has the ability to significantly influence the investee's operations and decision-making. On January 1, 2021, the balance in the Investment in Burkes Co. account was $402,000. Amortization associated with the purchase of this investment is $8,000 per year. During 2021, Burkes earned income of $108,000 and paid cash dividends of $36,000. Previously in 2020, Burkes had sold inventory costing $28,800 to Borgin for $48,000. All but 25% of this merchandise was consumed by Borgin during 2020. The remainder was used during the first few weeks of 2021. Additional sales were made to Borgin in 2021; inventory costing $33,600 was transferred at a price of $60,000. Of this total, 40% was not consumed until 2022.What was the balance in the Investment in Burkes Co. account at the end of 2021?

Definitions:

Land Conveyed

Refers to the process of transferring ownership of real estate from one party to another through a legal document such as a deed.

Estate Conveyed

The process of transferring property ownership, typically through a legal deed, from one party to another.

Consideration

Something of value given by both parties to a contract that induces them to enter into the agreement to exchange mutual performances.

Restrictive Covenants

Clauses within a contract that limit the actions of the parties, commonly used in employment and real estate agreements to restrict competition or usage.