Use the following information to solve the following questions:
During calendar 2020, Davel Corp. reported net income of $ 45,000 and paid total cash dividends of $ 15,000. Ryan Inc. owns 2,250 of the 7,500 outstanding shares of Davel and exercises significant influence.
-How much income from its investment in Davel should Ryan report in 2020?
A) $ 45,000
B) $ 15,000
C) $ 13,500
D) $ 22,500

Question

Quizplus · Accepted Answer

Since Ryan Inc. exercises significant influence, it should use the equity method to account for its investment in Davel. Under the equity method, Ryan Inc. would recognize its share of Davel's net income, which would be 2,250/7,500 x $45,000 = $13,500. Therefore, the correct answer is C.

Use the Following Information to Solve the Following Questions