Pyming Corporation Accounts for Its 40% Investment in Sillabog Company

question 9

Multiple Choice

Pyming Corporation accounts for its 40% investment in Sillabog Company using the equity method.On the date of the original investment,fair values were equal to the book values except for a patent,which cost Pyming an additional $40,000.The patent had an estimated life of 10 years.Sillabog has a steady net income of $20,000 per year and consistently pays out 40% of its net income as dividends to its shareholders.Which one of the following statements is correct?

• A)The net change in the investment account for each full year will be a debit of $8,000.
• B)The net change in the investment account for each full year will be a debit of $4,800.
• C)The net change in the investment account for each full year will be a debit of $800.
• D)The net change in the investment account for each full year will be a credit of $800.

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Definitions:

Depression

An emotional health issue defined by an ongoing depressed state or absence of pleasure in tasks, which considerably hinders daily activities.

Psychological Disorders

Mental disorders characterized by patterns of thought, feeling, and behavior that are significantly distressing, deviant from cultural norms, and lead to impairment in functioning.

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