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:

Extraction Level

Refers to the volume or rate at which natural resources are being removed from the earth, such as mining for minerals or drilling for oil.

Present Value

The present value is the current worth of a future sum of money or stream of cash flows given a specified rate of return.

Future Profits

The expected financial gains of a company or investment over future periods, often considered for making business or investment decisions.

Profit-Maximizing

A strategy where a firm adjusts its production output and pricing to achieve the highest possible profit.