A Parent Company Uses the Partial Equity Method to Account

question 16

Multiple Choice

A parent company uses the partial equity method to account for an investment in common stock of its subsidiary. A portion of the dividends received this year were in excess of the parent company's share of the subsidiary's earnings subsequent to the date of the investment. The amount of dividend income that should be reported in the parent company's separate income statement should be:

• A) zero.
• B) the total amount of dividends received this year.
• C) the portion of the dividends received this year that were in excess of the parent's share of subsidiary's earnings subsequent to the date of investment.
• D) the portion of the dividends received this year that were not in excess of the parent's share of subsidiary's earnings subsequent to the date of investment.

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Definitions:

Complementary Goods

Products or services that are used together, where an increase in demand for one leads to an increase in demand for the other.

Substitute Goods

Products or services that can be used in place of each other by consumers.

Price of Oil

The amount of money required to purchase a barrel of oil, influenced by global supply and demand, geopolitical events, and other factors.

Natural Gas

Natural gas is a fossil fuel consisting mainly of methane and other hydrocarbons, used as a source of energy for heating, cooking, and electricity generation.