Figure:
Acker Inc Howell Reported Net Income of $100,000 in 2010 and $120,000

question 115

Multiple Choice

Figure:
Acker Inc. bought 40% of Howell Co. on January 1, 2010 for $576,000. The equity method of accounting was used. The book value and fair value of the net assets of Howell on that date were $1,440,000. Acker began supplying inventory to Howell as follows: $\begin{array}{cccc}\text { Year } & \begin{array}{c}\text { Cost to } \\\text { Acker }\end{array} & \begin{array}{c}\text { Transfer } \\\text { Price }\end{array} & \begin{array}{c}\text { Amount Held by } \\\text { Howell at Year-End }\end{array} \\2010 & \$ 55,000 & \$ 75,000 & \$ 15,000 \\2011 & \$ 70,000 & \$ 110,000 & \$ 55,000\end{array}$ Howell reported net income of $100,000 in 2010 and $120,000 in 2011 while paying $40,000 in dividends each year.
-What is the balance in Acker's Investment in Howell account at December 31, 2010?

• A) $576,000.
• B) $598,400.
• C) $614,400.
• D) $606,000.
• E) $616,000.

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Definitions:

Temporal Precedence

Refers to the sequence in which events occur, indicating that one event happens before another, allowing for the possibility of establishing a causal relationship.

Basic Research

aims at gaining fundamental knowledge and understanding of phenomena without immediate practical application or use in view, often driven by curiosity and exploratory motives.

Attribution Theory

Attribution theory is a psychological theory focused on how people interpret events and how this relates to their thinking and behavior, especially how they attribute causes to events.

Temporal Precedence

A principle in causal inference, suggesting that a cause must precede its effect in time for a causal relationship to be considered.