Barking Power Company Accounts for Its 35% Investment in Pipeline

question 55

Multiple Choice

Barking Power Company accounts for its 35% investment in Pipeline Corporation under the equity method of accounting.The investment was made on January 1,2017,at a cost of $625,000.Pipeline Corporation reported net income of $85,000 for the year ended December 31,2017,and paid total dividends of $20,000 during 2017.On December 31,2017,after making all appropriate entries,the balance in Barking Power Company's Long-Term Investment account will equal:

• A) $647,750
• B) $602,250
• C) $583,000
• D) $690,000

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Definitions:

Cash Collections

The process of gathering monies that are owed to a business by its customers or clients.

Beginning Inventory

The value of goods available for sale at the start of an accounting period, prior to any purchases or production during the period.

Ending Inventory

The value of goods available for sale at the end of an accounting period after goods sold are subtracted.

August Sales

The total sales revenue generated by a business during the month of August.