Gilman Company purchased 100,000 of the 250,000 shares of common stock of Burke Corporation on January 1,2019,at $40 per share as a long-term investment.The records of Burke Corporation showed the following on December 31,2019:
- How much should Gilman Company report as investment income from the Burke investment during 2019?

Question

Gilman Company purchased 100,000 of the 250,000 shares of common stock of Burke Corporation on January 1,2019,at $40 per share as a long-term investment.The records of Burke Corporation showed the following on December 31,2019: 
- How much should Gilman Company report as investment income from the Burke investment during 2019?

Quizplus · Accepted Answer

Gilman Company should report $230,000 as investment income from the Burke investment during 2019. This is because the income from an investment is recognized based on the share of profits of the investee company that is attributable to the investing company, assuming the use of the equity method for accounting.

Gilman Company Purchased 100,000 of the 250,000 Shares of Common