The Island Cruises stock is publically traded. During the year, Island Cruises reported net income of $80,000 and paid cash dividends of $20,000. How should Oakbrook Travel account for its investment in Island Cruises? Select one: A. Apply the equity method and report the investment at market value at year end. B. Account for the investment as a special purpose entity. C. Apply the equity method and perform a full consolidation. D. Apply mark-to-market accounting and consolidate the statements at year end.
The Island Cruises stock is publically traded. During the year, Island Cruises reported net income of $80,000 and paid cash dividends of $20,000. How should Oakbrook Travel account for its investment in Island Cruises? Select one: A. Apply the equity method and report the investment at market value at year end. B. Account for the investment as a special purpose entity. C. Apply the equity method and perform a full consolidation. D. Apply mark-to-market accounting and consolidate the statements at year end.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Oakbrook Travel, Inc. acquired an 80% interest in Island Cruises on December 31 for $485,000. Oakbrook has the ability to exercise significant influence on management decisions. The Island Cruises stock is publically traded. During the year, Island Cruises reported net income of $80,000 and paid cash dividends of $20,000.
How should Oakbrook Travel account for its investment in Island Cruises?
How should Oakbrook Travel account for its investment in Island Cruises?
Select one:
A. Apply the equity method and report the investment at market value at year end.
B. Account for the investment as a special purpose entity.
C. Apply the equity method and perform a full consolidation.
D. Apply mark-to-market accounting and consolidate the statements at year end.
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