On January 1, 2020, Scallop Corp

question 28

Multiple Choice

On January 1, 2020, Scallop Corp. purchased 25% of Prawn Corp.'s common shares; no goodwill resulted from the purchase. Scallop correctly uses the equity method to account for this investment at equity. The Investment in Associate account related to the Scallop investment was reported on the December 31, 2020, statement of financial position at $ 360,000. Prawn had reported net income of $ 225,000 for calendar 2020, and paid dividends totalling $ 90,000 during 2020. How much did Scallop pay for its 25% interest in Prawn?

• A) $ 393,750
• B) $ 382,500
• C) $ 360,000
• D) $ 326,250

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Definitions:

Hip Replacement

A surgical procedure in which a diseased or damaged hip joint is replaced with an artificial joint or prosthesis to relieve pain and improve mobility.

Bed Rest

A medical recommendation to restrict activities and remain lying down for most of the day to promote healing or recovery.

Dyspnea

Difficulty or discomfort in breathing, often described as shortness of breath.

Hemorrhage

Excessive bleeding or blood loss, either internally or externally.