CFA Practice Question

There are 334 practice questions for this study session.

CFA Practice Question

Fairway Corporation owns 35% of the common stock of Tee Company. At the beginning of 2011, the balance of Fairway's "Investment in Tee" account was $100,000. During 2011, Tee Corp. earned $120,000 in net income and declared and paid $60,000 in total cash dividends. The market value of the Tee Company shares increased from $125,000 to $140,000 during the year.

At what amount will the Investment in Tee Corporation account be reported on Fairway's 12/31/2011 balance sheet?
A. $142,000
B. $140,000
C. $121,000
Explanation: The investment account increases by a net amount of $21,000 ($42,000 [120,000 x .35] net income less $21,000 [60,000 x .35] dividends), and thus the ending balance is $121,000.

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