Republic Corp.owns a 15% interest in the common shares of Wholesome Ltd.During this year, Wholesome pays a total of $25,000 in dividends and reports $160,000 net income.Republic's investment in Wholesome will increase Republic's net income by

A) $25,000.
B) $24,000.
C) $27,750.
D) $ 3,750.

Question

muskan nijjar · Accepted Answer

Final Answer : D, Explanation :  Republic Corp. owns 15% of Wholesome Ltd., so it will recognize 15% of Wholesome's net income as its own, which is $160,000 * 15% = $24,000. However, dividends received do not affect net income under the equity method, so the increase in net income is solely from the share of net income, not dividends.

Republic Corp.owns a 15% interest in the common shares of Wholesome Ltd.During this year, Wholesome pays a total of $25,000 in dividends and reports $160,000 net income.Republic's investment in Wholesome will increase Republic's net income by

A) $25,000.
B) $24,000.
C) $27,750.
D) $ 3,750.

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Republic Corp.owns a 15% interest in the common shares of Wholesome Ltd.During this year, Wholesome pays a total of $25,000 in dividends and reports $160,000 net income.Republic's investment in Wholesome will increase Republic's net income byA) $25,000.B) $24,000.C) $27,750.D) $ 3,750.

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Learning Objectives

Related questions

Republic Corp.owns a 15% interest in the common shares of Wholesome Ltd.During this year, Wholesome pays a total of $25,000 in dividends and reports $160,000 net income.Republic's investment in Wholesome will increase Republic's net income by

A) $25,000.
B) $24,000.
C) $27,750.
D) $ 3,750.