XYZ buys a 24% share in ABC for $80m.ABC's total net profit is $50m and it pays $4m in dividends to XYZ.Using the cost method,what would be the revenue and investment amounts at year-end for this investment?
A) $4m,$80m
B) $4m,$84m
C) $12m,$80m
D) $12m,$92m.

Question

Quizplus · Accepted Answer

Under the cost method, the revenue recognized is the dividends received, which is $4m. The investment amount remains at the initial cost of $80m, as the cost method does not adjust for changes in net profit or retained earnings.

XYZ Buys a 24% Share in ABC for $80m