Pendleton Company acquired a 70% interest in Sunflower Company on December 31, 2013, for $380,000.During 2014 Sunflower had a net income of $30,000 and paid a cash dividend of $10,000.Applying the cost method would give a debit balance in the Investment in Stock of Sunflower Company account at the end of 2014 of:
A)$400,000.
B)$394,000.
C)$373,000.
D)$380,000.

Question

Quizplus · Accepted Answer

Under the cost method, the investment account remains at the initial cost of acquisition, which is $380,000, regardless of the subsidiary's net income or dividends.

Pendleton Company Acquired a 70% Interest in Sunflower Company on December