Gaw Company Owns 15% of the Common Stock of Trace

question 117

Multiple Choice

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 2013 and paid dividends of $60,000 on October 1, 2013. How much income should Gaw recognize on this investment in 2013?

• A) $16,500.
• B) $9,000.
• C) $25,500.
• D) $7,500.
• E) $50,000.

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Definitions:

Asch Experiment

A series of psychological experiments conducted by Solomon Asch studying if and how individuals yield to or defy a majority group and the effect of such influences on beliefs and opinions.

Compliance

The act of conforming to a request, command, or set of regulations; this often involves adjusting one's behavior to align with societal or organizational standards.

Conversion

The process of changing or causing something to change from one form to another.

Incorrect Majority

A situation where the larger part of a group holds a false belief or makes a wrong decision, potentially influencing others to follow suit.