Greene Limited owns a 30% interest in the shares of Fields Corporation.During the year, Fields pays $20,000 in dividends to Greene and reports $120,000 profit.Greene's investment in Fields will increase Greene's profit by
A)$36,000.
B)$30,000.
C)$20,000.
D)$ 6,000.

Question

Quizplus · Accepted Answer

Greene Limited owns a 30% interest in Fields Corporation, so it recognizes 30% of Fields' profit. 30% of $120,000 profit is $36,000, which increases Greene's profit. The dividends received do not affect the profit recognized under the equity method.

Greene Limited Owns a 30% Interest in the Shares of Fields