Magnus Tech owns 30% of Mirika Inc. and accounts for the investment using the equity method....
Magnus Tech owns 30% of Mirika Inc. and accounts for the
investment using the equity method. During the year, Mirika reports
a net loss of $2,500,000 and pays total dividends of
$70,000.
Which of the following describes the change in Magnus’ investment
in Mirika during the year?
A. The investment decreases by $771,000
B. The investment decreases by $2,430,000
C. The investment increases by $21,000
D. The investment decreases by $735,000
Homework Answers
Option A is correct i.e. the investment decreases by $771,000.
Reason:-
Net income of the investee company increases the investment value while net loss and dividend payout decreases the investment amount.
Magnus investment in Mirika inc. decreases by :-
= (2,500,000 + 70,000) x 30% = $771,000
Add Answer to:
Magnus Tech owns 30% of Mirika Inc. and accounts for the
investment using the equity method....
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