Use the Following Information to Answer the Question(s)below

question 32

Multiple Choice

Use the following information to answer the question(s) below.
On January 1,2011,Pansy Company acquired a 10% interest in Sunflower Corporation for $80,000 when Sunflower's stockholders' equity consisted of $400,000 capital stock and $100,000 retained earnings.Book values of Sunflower's net assets equaled their fair values on this date.Sunflower's net income and dividends for 2011 through 2013 were as follows:

-Jacana Corporation paid $200,000 for a 25% interest in Lilypad Corporation's common stock on January 1,2010,but was not able to exercise significant influence over Lilypad.During 2011,Jacana reported income of $120,000,excluding its income from Lilypad,and paid dividends of $50,000.Lilypad reported net income of $40,000 during 2011 and paid dividends of $20,000.Jacana should report net income for 2011 in the amount of

• A)$115,000.
• B)$120,000.
• C)$125,000.
• D)$130,000.

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Definitions:

Operating Fund

A fund used to cover the day-to-day operational expenses of an organization.

Capital Fund

A reserve of capital that can be used for specific purposes, often to fund long-term investment projects or to cover future liabilities.

Restricted Fund Method

An accounting principle used by non-profit organizations, where donations or grants are kept in separate accounts and are spent only according to donors' stipulations.

Capital Fund

A financial resource that is used for the purchase of fixed assets or for significant investment in a business, not consumed in normal operations.