Pendleton Company acquired a 70% interest in Sunflower Company on December 31, 2016, for $380,000. During 2017 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 2017 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 original 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