Use the Following Information to Answer the Question(s) Below

question 47

Multiple Choice

Use the following information to answer the question(s) below.

On January 1, 2014, Pardy Corporation acquired a 70% interest in the common stock of Salter Corporation for $7,000,000 when Salter's stockholders' equity was as follows:
There were no preferred dividends in arrears on January 1, 2014. There are no book value/fair value differentials.
-Assume Salter's net income for 2014 is $220,000.No dividends are declared or paid in 2014.What is the change in Pardy's Investment in Salter for the year ending December 31,2014?

• A)$84,000
• B)$119,000
• C)$154,000
• D)$189,000

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Definitions:

Non-interest-bearing

A financial term describing a debt or loan that does not accrue interest over time.

Simple Interest

A method of calculating the interest charge on a loan based on the original principal balance and not on accumulated interest.

T-bill

A short-term government security with maturity periods ranging from a few days to 52 weeks.

Prevailing Yield

The current return rate on an investment, typically referring to bonds or other fixed-income securities.