Use the Following Information to Solve the Following Questions

question 8

Multiple Choice

Use the following information to solve the following questions:
During calendar 2020, Davel Corp. reported net income of $ 45,000 and paid total cash dividends of $ 15,000. Ryan Inc. owns 2,250 of the 7,500 outstanding shares of Davel and exercises significant influence.
-On December 31, 2020, Ryan Corp. acquired a 40% interest in Gosling Corp. for $ 315,000. During 2021, Gosling reported net income of $ 200,000 and paid total cash dividends of $ 50,000. Assuming Ryan uses the equity method, at December 31, 2021, the balance in the investment account should be

• A) $ 395,000.
• B) $ 295,000.
• C) $ 375,000.
• D) $ 255,000.

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Definitions:

Stock Value

The estimated monetary worth of a particular stock in the financial market.

Yield to Maturity

The total return expected on a bond if it is held until its maturity date, incorporating all interest payments and assuming reinvestment at the same rate.

Cost of Debt

The effective interest rate a company pays on its debts, a key component in the calculation of a firm’s cost of capital.

Risk Premium

The excess return required from an investment in a risky asset over a risk-free investment.