Homework Answers
SOLUTION:
Puma Corporation acquired 30% of Slume Company Stock.
Whenever we followed the equity method of investment than dividend received from Investment Company than it will be reduced from the investment value.
It means amount received from investment will affect as below,
Share of Dividend = $ 10,000 X 30% = $ 3,000
$ 3,000 dividend received will be reduced from investment value $ 150,000
Now, Investment income will be reported as below,
Investment income of Slume Company = Net income Less Dividend Received
Investment income of Slume Company = $ 25,000 - $ 10,000
Investment income of Slume Company = $ 15,000
Investment income of Puma for the year 2014 = Net income after dividend in Slume X 30%
Investment income of Puma for the year 2014 = $ 15,000 X 30%
Investment income of Puma for the year 2014 = $ 4,500
Answer = Option C = $ 4,500
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