Asked by Floyd Turner on Jul 29, 2024
Verified
Refer to Exhibit 15-1.Circle should report income from the investment in Birch Company for 2010 of
A) $ 40, 000
B) $ 80, 000
C) $120, 000
D) $160, 000
Cash Dividend
A payment made by a corporation to its shareholders, usually in the form of cash, based on the number of shares they own.
Report Income
The act of documenting and declaring earned income within a specific period for tax and accounting purposes.
- Familiarize oneself and engage with the equity method for investments in accounting.
Verified Answer
JW
jessica wynneJul 29, 2024
Final Answer :
C
Explanation :
Circle Corporation owns 40% of Birch Company's outstanding common stock, therefore Circle has significant influence over Birch. As per the equity method, Circle should report its share of Birch's income and dividends, which is $120,000 (40% of $300,000) for income and $40,000 (40% of $100,000) for dividends. Therefore, the correct option is C.
Learning Objectives
- Familiarize oneself and engage with the equity method for investments in accounting.