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19 September, 04:24

Yaro Company owns 30% of the common stock of Dew Co. and uses the equity method to account for the investment. During 2018, Dew reported income of $250,000 and paid dividends of $80,000. There is no amortization associated with the investment. During 2018, how much income should Yaro recognize related to this investment?

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  1. 19 September, 05:16
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    Investment Income = $75,000

    Explanation:

    Percentage of Stock Owned: 30%

    Reported Income for 2018: $250,000

    Investment Income: $250,000 x 30% = $75,000

    Dividend Paid: $80,000 x 30% = $24,000

    Of the $75,000 total income, $24,000 were paid as dividends and the rest remain as Dividend Receivable.
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Home » Business » Yaro Company owns 30% of the common stock of Dew Co. and uses the equity method to account for the investment. During 2018, Dew reported income of $250,000 and paid dividends of $80,000. There is no amortization associated with the investment.
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