On January 1, 20X4, Entertainment Company acquired 15% of the outstanding voting stock of Rocker Company as a long-term investment and classified the shares as available-for-sale securities. During 20X4, Rocker Company reported net income of $1,500,000 and dividends declared and paid of $250,000. How much income will be reported during 20X4 from the Rocker investment?
A) $225,000
B) $37,500
C) $187,500
D) $250,000

Question

Quizplus · Accepted Answer

Calculation: 20X4 investment (dividend) income ($37,500) = Proportionate share of Rocker's dividends ($250,000 × .15).

On January 1, 20X4, Entertainment Company Acquired 15% of the Outstanding