On January 1, 20X1, Belle Ltd $$\begin{array} { | l | l | } \hline \text { Cost } & \text { Equity } \\\hline 660,000 & \$ 700,000 \\\hline\end{array}$$

question 1

Multiple Choice

On January 1, 20X1, Belle Ltd. purchased 100% of the common shares of Dominique Corporation for $700,000. Dominique's net income was $30,000 for 20X1 and $50,000 for 20X2. Dominique paid dividends of $20,000 on its common shares during 20X1 and $100,000 during 20X2. As such, total dividends paid by Dominique exceeded income earned by Dominique since it was acquired by Belle. What is the balance in the investment in Dominique's account at the end of 20X2 under the cost and equity methods?

• A) \[\begin{array} { | l | l | }
• \hline \text { Cost } & \text { Equity } \\
• \hline 660,000 & \$ 700,000 \\
• \hline
• \end{array}\]
• B) \[\begin{array} { | l | l | }
• \hline \text { Cost } & \text { Equity } \\
• \hline 660,000 & \$ 660,000 \\
• \hline
• \end{array}\]
• C) \[\begin{array} { | l | l | }
• \hline \text { Cost } & \text { Equity } \\
• \hline 700,000 & \$ 660,000 \\
• \hline
• \end{array}\]
• D) \[\begin{array} { | l | l | }
• \hline \text { Cost } & \text { Equity } \\
• \hline 700,000 & \$ 700,000 \\
• \hline
• \end{array}\]

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Definitions:

Sales Budget

An estimate of future sales, often broken down into units and revenue, used for planning and control purposes within a business.

Budget

An estimation of revenue and expenses over a specified future period of time, used for financial planning and control.

Good Management

The effective and efficient administration of a company's resources, leading to the achievement of organizational goals.

Participative Budgeting

A budgeting process where employees at all levels are involved in the development of the budget, enhancing commitment and understanding of financial goals.