If instead,Poke could not exercise significant influence over the investee,by what amount will Poke's 20X8 income increase due to its investment in Shove?
A)$11,250
B)$2,500
C)$6,250
D)$7,500

Question

Quizplus · Accepted Answer

If Poke could not exercise significant influence over the investee, it would need to account for the investment using the cost method. Under the cost method, the investment is initially recorded at cost and adjusted for any dividends received. The income recognized from the investment is limited to the dividends received. According to the question, Shove paid a $2,500 dividend in 20X8. Therefore, Poke's income from the investment would increase by $2,500.

If Instead,Poke Could Not Exercise Significant Influence Over the Investee,by