Prime Industries Acquired an 80 Percent Interest in Sands Company

question 35

Multiple Choice

Prime Industries acquired an 80 percent interest in Sands Company by purchasing 24,000 of its 30,000 outstanding shares of common stock at book value of $105,000 on January 1, 2016. Sands reported net income in 2016 of $45,000 and in 2017 of $60,000 earned evenly throughout the respective years. Prime received $12,000 dividends from Sands in 2016 and $18,000 in 2017. Prime uses the equity method to record its investment. Prime should record investment income from Sands during 2017 of:

• A) $18,000.
• B) $60,000.
• C) $48,000.
• D) $33,600.