Asked by
Valine Guerrier
on Oct 28, 2024
Verified
On January 1,2019,Entertainment Company acquired 15% (80,000 shares) of the outstanding voting stock of Rocker Company as a long-term investment for $1,784,000.During 2019,Rocker Company reported net income of $1,500,000 and dividends were declared and paid in the amount of $250,000.How much income will be reported during 2019 from the Rocker investment if the year-end price of the shares is $22.30 per share?
A) $225,000.
B) $37,500.
C) $187,500.
D) $250,000.
Outstanding Voting Stock
The total shares of a corporation's stock that are currently owned by shareholders, including those with voting rights.
Long-Term Investment
Investments held for an extended period, typically longer than one year, to achieve sustained growth or income.
Net Income
The profit of a company after all expenses, taxes, and costs have been subtracted from total revenue.
- Identify and apply the equity method of accounting for investments that provide significant influence but not control.
Verified Answer
TC
Learning Objectives
- Identify and apply the equity method of accounting for investments that provide significant influence but not control.