On January 4, Year 1, Barber Company Purchased 5,000 Shares

question 200

Multiple Choice

On January 4, Year 1, Barber Company purchased 5,000 shares of Convell Company for $59,500 plus a broker's fee of $1,000. Convell Company has a total of 25,000 shares of common stock outstanding and it is presumed the Barber Company will have a significant influence over Convell. During each of the next two years, Convell declared and paid cash dividends of $0.85 per share, and its net income was $72,000 and $67,000 for Year 1 and Year 2, respectively.
-What is the book value of Barber's investment in Convell at the end of Year 2?

• A) $52,000.
• B) $79,800.
• C) $88,300.
• D) $87,300.
• E) $60,500.

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Definitions:

Closing Entries

Journal entries made at the end of an accounting period to transfer the balances of temporary accounts to permanent accounts and prepare the company's books for the next period.

Accounting Cycle

A sequence of steps in processing financial transactions, from the initial recording to the preparation of financial statements, usually completed over a specific period.

General Journal

A bookkeeping ledger that records each financial transaction of a company in chronological order.