On 1 January 2016,Yu Ltd Acquired 100 000 Shares (30

question 28

Multiple Choice

On 1 January 2016,Yu Ltd acquired 100 000 shares (30 per cent of the voting interest) in Ping Ltd for $900 000 cash.On 30 June 2016,Ping Ltd announced its earnings per share for the first six months of 2016 at $2.00 per share.On 20 November,Ping Ltd paid dividends to shareholders at $1.20 per share.On 31 December 2016,Ping Ltd announced its earnings per share for 2016 at $3.50 per share (i.e. ,$1.50 additional since 30 June) .
-If Yu Ltd used the cost method,what dividend revenue would it record for the year ended 31 December 2016 in respect of its investment in Ping Ltd?

• A) Nil
• B) $120 000
• C) $200 000
• D) $350 000

---

Definitions:

Perfect Substitutes

Goods for which consumers are willing to replace one for the other at a constant rate, without affecting their level of utility.

Substitution Effect

The change in consumption patterns due to a change in relative prices, leading consumers to substitute one product for another.

Income Effect

The effect of modifications in earnings for a person or the economy on how much of a good or service is sought after.

Income Tax

A tax levied by governments on individuals or entities based on their income or profits.