Dunbrook Travel, Inc. acquired an 80% interest in Ocean Cruises on December 31 for $970,000. Dunbrook has the ability to exercise significant influence on management decisions. The Ocean Cruises stock is publically traded. During the year, Ocean Cruises reported net income of $160,000 and paid cash dividends of $40,000. How should DunbrookTravel account for its investment in Ocean Cruises? A. Apply the equity method and report the investment at market value at year end. B. Apply the equity method and perform a full consolidation. C. Apply mark-to-market accounting and consolidate the statements at year end. D. Account for the investment as a special purpose entity.

Dunbrook Travel, Inc. acquired an 80% interest in Ocean Cruises on December 31 for $970,000. Dunbrook has the ability to exercise significant influence on management decisions. The Ocean Cruises stock is publically traded. During the year, Ocean Cruises reported net income of $160,000 and paid cash dividends of $40,000. How should DunbrookTravel account for its investment in Ocean Cruises? A. Apply the equity method and report the investment at market value at year end. B. Apply the equity method and perform a full consolidation. C. Apply mark-to-market accounting and consolidate the statements at year end. D. Account for the investment as a special purpose entity.

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter3: Evaluation Of Financial Performance

Section: Chapter Questions

Problem 20P

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