XYZ buys a 24 per cent share in ABC for $80m.ABC's total net profit is $50m and it pays $4m in dividends to XYZ.
-Using the cost method,what would be the revenue and investment amounts at year-end for this investment?
A) $4m and $80m
B) $4m and $84m
C) $12m and $80m
D) $12m and $92m

Question

Quizplus · Accepted Answer

Under the cost method, only the dividends received from the investment are recognized as revenue. Therefore, the revenue is $4m. The investment amount remains at the initial cost of $80m, as the cost method does not adjust the investment's carrying amount for the investor's share of the investee's profits or losses.

XYZ Buys a 24 Per Cent Share in ABC for $80m.ABC's