Table 16-2 Big Corporation Paid $95,000 to Acquire a 30% Investment in Investment

question 85

Multiple Choice

Table 16-2
Big Corporation paid $95,000 to acquire a 30% investment in the common shares of Little Corporation on January 3, 2017. On December 31, 2017, Little Corporation's net income was $210,000 and Little Corporation paid dividends of $80,000. On December 31, 2018, Little Corporation's net income was $170,000 and Little Corporation paid dividends of $60,000. Big Corporation used the equity-method to account for this investment.
-Refer to Table 16-2.Big Corporation's entry to record the acquisition of these shares includes a:

• A) debit to Cash for $95,000
• B) debit to Short-Term Investments for $95,000
• C) debit to Investment in Little Corporation Common Shares for $95,000
• D) credit to Investment Revenue for $95,000

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Definitions:

Cash Inflow

Money entering a business, typically from operations, investments, or financing activities.

Cash Outflow

Refers to the payment of money in the form of cash or cash equivalents by a business for various purposes, including operating expenses, investment activities, and financing activities.

Direct Method

A way of presenting a cash flow statement where major classes of gross cash receipts and payments are disclosed, providing insight into the sources and uses of cash.

Cash Paid

The total amount of cash disbursed by a company for various purposes, including operating expenses, investing activities, and financing activities.