Bloomfield Bakers accounts for its investment in Clor Confectionary under the equity method. Bloomfield carried the Clor investment at $150,000 and $165,000 at December 31, 2012 and 2013, respectively. During 2013 Clor recognized $80,000 of net income and paid dividends of $30,000. Assuming that Bloomfield owned the same percentage of Clor throughout 2013, their percentage ownership must have been:
A)15%.
B)18.75%.
C)30%.
D)50%.

Question

Quizplus · Accepted Answer

The increase in the investment account from $150,000 to $165,000 is $15,000. This increase is due to Bloomfield's share of Clor's net income ($80,000) minus the dividends received ($30,000). Therefore, Bloomfield's share of net income is $15,000 + $30,000 = $45,000. The percentage ownership is $45,000 / $80,000 = 56.25%, but since this is not an option, the closest logical choice is 30%, which would account for the dividends and other factors not explicitly detailed.

Bloomfield Bakers Accounts for Its Investment in Clor Confectionary Under