Yaro Company Owns 30% of the Common Stock of Dew

question 86

Multiple Choice

Yaro Company owns 30% of the common stock of Dew Co. and uses the equity method to account for the investment. During 2011, Dew reported income of $250,000 and paid dividends of $80,000. There is no amortization associated with the investment. During 2011, how much income should Yaro recognize related to this investment?

• A) $24,000.
• B) $75,000.
• C) $99,000.
• D) $51,000.
• E) $80,000.

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Definitions:

Loans

Financial agreements where money is lent to another party in exchange for future repayment of the principal amount along with interest or other finance charges.

Retained Earnings

The portion of a company's profits that is kept or retained within the company to be used for business growth or debt repayment, rather than being distributed to shareholders as dividends.

Venture Capital

Investment provided by financiers to startups and small firms believed to possess a strong potential for growth in the long run.

Anticipated Profits

Expected financial gains based on projected business activities, market conditions, and strategies, before they are actually realized.