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 equity method,the revenue recognised for this investment during the year would be:
A) $4m.
B) $12m.
C) $50m.
D) $0.

Question

Quizplus · Accepted Answer

When using the equity method, the revenue recognized for the investment is proportional to the investor's share of the investee's net income. In this case, XYZ owns a 24% share in ABC, so it can recognize 24% of ABC's net income, which is $12m (24% x $50m). Since XYZ received $4m in dividends, the net revenue recognized would be $8m ($12m - $4m). Therefore, the correct answer is B.

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