Magnus Tech owns 30% of Mirika Inc. and accounts for the investment using the equity method. During the year, Mirika reports a net loss of $2,500,000 and pays total dividends of $70,000. Which of the following describes the change in Magnus' investment in Mirika during the year? A. The investment decreases by $771,000B. The investment decreases by $2,430,000C. The investment increases by $21,000D. The investment decreases by $735,000

Question

Business

Aracely Parrish

31 March, 05:40

Magnus Tech owns 30% of Mirika Inc. and accounts for the investment using the equity method. During the year, Mirika reports a net loss of $2,500,000 and pays total dividends of $70,000. Which of the following describes the change in Magnus' investment in Mirika during the year? A. The investment decreases by $771,000B. The investment decreases by $2,430,000C. The investment increases by $21,000D. The investment decreases by $735,000

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Answers (1)

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Solomon Weeks · Answer 1

A. The investment decreases by $771,000

Explanation:

As per the question the following details are given below : -

Net loss = $2,500,000

Total Dividend = $70,000

Owning Percentage = 30%

The computation of during the year is given below:-

Net loss + Total Dividend x Owning Percentage

= ($2,500,000 + $70,000) x 30%

= $2,570,000 x 30%

= $771,000

So, the Magnus investment in Mirika inc. reduces by $771,000