Question

Bharrat Corporation purchased 40% of Ferris Corporation for $100,000 on January 1. On October 17 of the same year, Ferris Corporation declared total cash dividends of $12,000. At year-end, Ferris Corporation reported net income of $60,000. The balance in the Bharrat Corporation's Long-Term Investment-Ferris account at December 31 should be:

Answer 1

Answer:

The balance in the Bharrat Corporation's Long-Term Investment-Ferris account at December 31 should be $100,000

Explanation:

The Purchase of 40% of Ferris Corporation for $100,000 is a Financial Asset. A financial asset is a contractual obligation to receive cash.

Bharrat Corporation is expected to receive cash from the investment is has made in Ferris Corporation.

The investment is measured at Cost of $100,000 in the Financial Statements. Declaration of dividend does not affect measurement of the Investment.