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The summarized balance sheets of Thunder Bay Corp.and Fort William Corp.at December 31, 2017 are as follows:
-If Thunder Bay acquired a 20% interest in Fort William on December 31, 2017 for $65,000 and the equity method of accounting for the investment were used, the amount of the debit to Investment in Fort William Corp.would have been
A)$65,000.
B)$60,000.
C)$45,000.
D)$37,000.

Question

Use the following information for questions.
The summarized balance sheets of Thunder Bay Corp.and Fort William Corp.at December 31, 2017 are as follows: 
-If Thunder Bay acquired a 20% interest in Fort William on December 31, 2017 for $65,000 and the equity method of accounting for the investment were used, the amount of the debit to Investment in Fort William Corp.would have been
A)$65,000. 
B)$60,000. 
C)$45,000. 
D)$37,000.

Quizplus · Accepted Answer

Under the equity method, the initial investment is recorded at cost. Therefore, the debit to Investment in Fort William Corp. would be the purchase price of $65,000.

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