On January 1, 20X1, Company P Purchased a 30% Interest

question 15

Multiple Choice

On January 1, 20X1, Company P purchased a 30% interest in the Company S for $345,000.At that time, Company S had stockholders' equity of $1,000,000.Any excess cost over book value was attributed to a patent with a 15-year life.During 20X1, Company S earned $60,000 and paid dividends of $15,000.What is the balance in the investment account on December 31, 20X1, using the sophisticated equity method?

• A)$363,000
• B)​$360,000
• C)​$355,500
• D)​$349,500

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Definitions:

Marginal Cost (MC)

The rise in overall expenses linked to the production of an extra unit of a product or service.

Average Variable Cost (AVC)

The total variable cost divided by the quantity of output produced, measuring the variable cost per unit.

Average Total Costs (ATC)

The per-unit total cost (including both fixed and variable costs) of producing a good or offering a service.

Manufacturing Firm

A company involved in the conversion of raw materials into finished goods through the use of equipment and processes.