Republic Corp. owns a 15% interest in the common shares of Wholesome Ltd. During this year, Wholesome pays a total of $25,000 in dividends and reports $160,000 net income. Republic's investment in Wholesome will increase Republic's net income by
A) $25,000.
B) $24,000.
C) $27,750.
D) $ 3,750.

Question

Quizplus · Accepted Answer

Republic Corp. owns less than 20% of Wholesome Ltd., so it uses the cost method. The increase in net income is based on dividends received: 15% of $25,000 = $3,750.