_____ Paxel owns 80% of Saxel's outstanding common stock. For 2006, Saxel reported $60,000 of net income and declared dividends of $10,000. What amount appears in Paxel's 2006 income statement if Paxel accounts for its investment using the equity method?
A) $ -0-
B) $8,000
C) $40,000
D) $48,000
E) $56,000

Question

Quizplus · Accepted Answer

Paxel's share of Saxel's net income is 80% x $60,000 = $48,000. Paxel's share of Saxel's dividends is 80% x $10,000 = $8,000. Paxel's net income from its investment in Saxel is $48,000 - $8,000 = $40,000.

_____ Paxel Owns 80% of Saxel's Outstanding Common Stock