On January 1, 2014, Grange Corporation purchased 25% of the common shares of Butler Limited for $200,000.During 2014, Butler Corporation reported net earnings of $80,000 and paid cash dividends of
$40,000.How much investment income from its investment in Butler Limited did Grange report on its income statement ending December 31, 2014?

Question

Quizplus · Accepted Answer

Investment income from the 25% ownership in Butler Limited would be calculated as follows:
($200,000 cost of investment) x (25% ownership) = $50,000 share of Butler's net earnings
$50,000 share of earnings - $10,000 share of dividends received = $40,000 investment income reported on the income statement.

On January 1, 2014, Grange Corporation Purchased 25% of the Common