On 1 January 2019, Sky-High Ltd Acquired 100 000 Shares

question 12

Multiple Choice

On 1 January 2019, Sky-High Ltd acquired 100 000 shares (30 per cent of the voting interest) in Down Ltd for $600 000 cash. On 30 June 2019, Down Ltd announced its earnings per share for the first six months of 2019 at $1.50 per share. On 20 November, Down Ltd paid dividends to shareholders at $0.90 per share. On 31 December 2019, Down Ltd announced its earnings per share for 2019 at $2.80 per share (i.e. $1.30 additional since 30 June) . If Sky-High Ltd used the cost basis, what was the balance sheet value of investment in Down Ltd at 31 December 2019?

• A) $510 000
• B) $600 000
• C) $690 000
• D) $880 000

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Definitions:

Information-Processing Model

A cognitive approach that compares the mind to a computer, emphasizing how information is input, processed, stored, and retrieved.

Iconic Memory

A type of visual sensory memory that holds a brief photographic image of a scene that has just been observed.

Capacity

The maximum amount that something can contain or the ability to perform, function, or produce effectively.

Sperling

A psychologist who conducted pioneering research on the capacity of sensory memory, using a technique that demonstrated the brief duration of iconic memory.