On January 1,20X1,Best Décor Ltd

question 39

Multiple Choice

On January 1,20X1,Best Décor Ltd.started Chic Styles Ltd.by contributing $500,000 and received 100% of the common shares of Chic Styles.Chic Styles reported net income of $50,000 in 20X1 and $75,000 in 20X2 and paid out 40% of its net income as dividends in each year.Under the equity method,what amount should be reported as Investment in Chic Styles on Best Décor's separate-entity 20X2 financial statements?

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Definitions:

Desert Varnish

A thin, dark coating found on the surfaces of rocks in arid environments, composed of clay minerals mixed with iron and manganese oxides.

Playa

A flat-bottomed desert basin that temporarily becomes a shallow lake after rainfall.

Alluvial Fan

A conical-shaped deposit of sediment, typically found at the base of mountain ranges, created as flowing water loses energy and drops its load of solids.

Desert Wash

Dry streambeds in desert environments that temporarily fill with water during rainstorms.