How much income should Gaw recognize on this investment in 2018?

August 24, 2022| admin
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Aug 24, 2022 07:44 PM 1 Answers Accounting
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Gaw Company owns 15% of the common stock of Trace Corporation and used the fair-value method to account for this investment. Trace reported net income of $110,000 for 2018 and paid dividends of $60,000 on October 1, 2018. How much income should Gaw recognize on this investment in 2018?

 

  1. A) $16,500.
  2. B) $9,000.
  3. C) $25,500.
  4. D) $7,500.
  5. E) $50,000.

Answer: B

Learning Objective: 01-01

Topic: Investments―Fair-value method

Difficulty: 1 Easy

Blooms: Apply

AACSB: Knowledge Application

AICPA: BB Critical Thinking

AICPA: FN Measurement

Feedback: $60,000 × .15 = $9,000

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Anonymous
Edit Aug 24, 2022
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B

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