The market value of Investee is $1,000,000. Investor owns 20% of Investee's common stock. Investee reported net income of $200,000 and paid cash dividends in the amount of $40,000. a. The investment income that Investor will recognize is $8,000 b. The investment income that Investor will recognize is $40,000
The market value of Investee is $1,000,000. Investor owns 20% of Investee's common stock. Investee reported net income of $200,000 and paid cash dividends in the amount of $40,000. a. The investment income that Investor will recognize is $8,000 b. The investment income that Investor will recognize is $40,000
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Ma1.
-The market value of Investee is $1,000,000. Investor owns 20% of Investee's common stock. Investee reported net income of $200,000 and paid cash dividends in the amount of $40,000.
a. The investment income that Investor will recognize is $8,000
b. The investment income that Investor will recognize is $40,000
c. The investment income that Investor will recognize is $32,000
d. Investment income cannot be determined from the information provided.
-Suppose that, in the previous question, Investor does not have the ability to exercise significant influence over Investee. The investment income that Investor will recognize is:
a. $8,000
b. $40,000
c. $32,000
d. cannot be determined
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