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During calendar 2017, Caraway Corp.reported net income of $60,000 and paid total cash dividends of $20,000.Seed Inc.owns 3,000 of the 10,000 outstanding shares of Caraway and exercises significant influence.
-How much income from its investment in Caraway should Seed report in 2017?
A)$60,000
B)$20,000
C)$18,000
D)$30,000

Question

Quizplus · Accepted Answer

As Seed Inc. exercises significant influence over Caraway Corp., it is required to use the equity method to report its investment. Under this method, Seed would report its share of Caraway's net income, which is calculated as (3,000/10,000) x $60,000 = $18,000. Therefore, the correct answer is (C) $18,000.

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