Asked by Suraksha Lamichhane on May 27, 2024
Verified
Copper Company purchased 40% of the common stock of York Corporation on January 1,2019,for $2,000,000 as a long-term investment.The records of York Corporation showed the following on December 31,2019: 
How much investment income should Copper report from the York investment during 2019?
A) $290,000.
B) $108,000.
C) $116,000.
D) $8,000.
Investment Income
Investment income refers to the revenue generated from holding financial assets, including dividends, interest, and capital gains.
Long-Term Investment
Investments in assets or securities that a company intends to hold for a period longer than one year.
Common Stock
Equity ownership in a corporation, often with voting rights, representing a claim on a portion of the company's profits.
- Compute the goodwill stemming from acquisitions and the income derived from investments in entities accounted for using the equity method.
Verified Answer
BR
BranDee RhoneMay 28, 2024
Final Answer :
C
Explanation :
According to the information provided, Copper Company purchased 40% of the common stock of York Corporation on January 1, 2019, for $2,000,000 as a long-term investment. Therefore, Copper Company has significant influence over York Corporation and should use the equity method to account for the investment.
Using the equity method, Copper Company would recognize its share of York Corporation's net income or loss as investment income or loss. The records of York Corporation showed a net income of $290,000 for the year ended December 31, 2019. Therefore, Copper Company's share of the net income would be $290,000 x 40% = $116,000.
Therefore, the correct answer is C, $116,000, which represents the amount of investment income that Copper Company should report from the York investment during 2019.
Using the equity method, Copper Company would recognize its share of York Corporation's net income or loss as investment income or loss. The records of York Corporation showed a net income of $290,000 for the year ended December 31, 2019. Therefore, Copper Company's share of the net income would be $290,000 x 40% = $116,000.
Therefore, the correct answer is C, $116,000, which represents the amount of investment income that Copper Company should report from the York investment during 2019.
Learning Objectives
- Compute the goodwill stemming from acquisitions and the income derived from investments in entities accounted for using the equity method.