In 2015, Gigajoule Corporation Used the Equity Method to Account

question 63

Multiple Choice

In 2015, Gigajoule Corporation used the equity method to account for a 25% ownership interest in Megawatt Corporation. If Megawatt Corporation reports $400,000 of income and pays $80,000 of dividends in 2015, the net effect of the entries made by Gigajoule Corporation in 2015 will be to:

• A) reduce the Investment account by $320,000
• B) reduce the Investment account by $80,000
• C) increase the Investment account by $320,000
• D) increase the Investment account by $80,000

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Definitions:

After-Acquired Inventory

Inventory obtained by a company after it has granted a security interest in its inventory to a creditor, which may also fall under the security interest for that creditor.

Financing Statement

A document filed to give public notice of a secured transaction, thereby establishing a lender's security interest in the borrower's collateral.

Avalanche

In finance, an avalanche method refers to a strategy of paying off debts by starting with the highest interest rate debt first.

Security Interest

A legal claim or lien on collateral that has been pledged, typically to obtain a loan, ensuring the right to take possession if repayment is not made.