Pyming Corporation accounts for its 40% investment in Sillabog Company using the equity method. On the date of the original investment, fair values were equal to the book values except for a patent, which cost Pyming an additional $40,000. The patent had an estimated life of 10 years. Sillabog has a steady net income of $20,000 per year and consistently pays out 40% of its net income as dividends to its shareholders. Which one of the following statements is correct?

A) The net change in the investment account for each full year will be a debit of $8,000.

B) The net change in the investment account for each full year will be a debit of $4,800.

C) The net change in the investment account for each full year will be a debit of $800.

D) The net change in the investment account for each full year will be a credit of $800.

Answer rating: 100% (QA)

C The net change ... View the full answer