ABC Buys a 25 Per Cent Share in XYW for $80

question 25

Multiple Choice

ABC buys a 25 per cent share in XYW for $80 million. XYW's total net profit is $50 million and it pays $4 million in dividends to ABC. Using the equity method, the revenue recognised for this investment during the year would be:

• A) $4 million.
• B) $15 million.
• C) $60 million.
• D) None of the above

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Definitions:

Shutdown Point

The level of production and price at which a business's total revenue is equal to its total variable costs, making it indifferent between ceasing operations and continuing to produce.

Break-even

The point at which revenue received equals the costs associated with receiving the revenue, resulting in neither a profit nor a loss.

Profitable Output

The level of production at which a business or economic activity generates the highest amount of profit, balancing costs and revenues efficiently.

Market Price

The current price at which a good or service can be bought or sold in a marketplace, determined by the forces of supply and demand.