Use the Following Information to Solve the Following Questions:
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question 45

Multiple Choice

Use the following information to solve the following questions:
The summarized balance sheets of Thunder Bay Corp. and Fort William Corp. at December 31, 2020, are as follows:
$\quad$$\quad$$\quad$$\quad$ THUNDER BAY CORP.
$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$ Balance Sheet
$\quad$$\quad$$\quad$$\quad$$\quad$ December 31, 2020
$\begin{array}{llcc} \text {Assets. } &\underline{\$400,000} \\ \text {Liabilities. } &\$50,000\\ \text { Common shares } &200,000\\ \text { Retained earnings } &\underline{150,000}\\ \text { Total equities } &\underline{\$400,000}\\\end{array}$


$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$ FORT WILLIAM CORP.
$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$ Balance Sheet
$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$ December 31, 2020
$\begin{array}{llcc} \text { Assets } & \underline{\$300,000} \\\end{array}$

$\begin{array}{c}\text {FORT WILLIAM CORP.}\\\text {Balance Sheet}\\\text {December 31,2020}\\\begin{array}{lll} \text { Assets.}\\ \text { Liabilities}\\ \text { Common shares.}\\ \text { Retained earnings.}\\ \text { Total equities.}\end{array}\begin{array}{l}\underline{\$ 300,000}\\\$ 75,000 \\185,000 \\\underline{40,000} \\\underline{\$ 300,000 }\\\end{array}\end{array}$

-If Thunder Bay acquired a 30% interest in Fort William on December 31, 2020, for $ 67,500 and during 2021 Fort William reported net income of $ 25,000 and paid a total cash dividend of $ 30,000, applying the equity method would give a debit balance in the Investment in Fort William Corp. account at the end of 2021 of

• A) $ 67,500.
• B) $ 66,000.
• C) $ 62,500.
• D) $ 58,500.

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Definitions:

Price Ceiling

A legal maximum price that can be charged for a product or service, typically set to protect consumers.

Producer Surplus

The difference between the amount producers are willing to accept for a good or service versus what they actually receive, usually measured above the supply curve up to the price level.

Price Ceiling

A legally established maximum price for a good or service, beyond which it cannot be sold.

Consumer Surplus

The difference between what consumers are willing to pay for a good or service and what they actually pay, representing their gained utility.