Exhibit 15-1 On January 1, 2010, Circle Corporation paid $900, 000 for 80, 000 shares of Birch Company's common stock, which represents 40% of Birch's outstanding common stock.Birch reported income of $300, 000 and paid a cash dividend of $100, 000 during 2010.
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Refer to Exhibit 15-1.Circle should report income from the investment in Birch Company for 2010 of

Question

Quizplus · Accepted Answer

Circle Corporation owns 40% of Birch Company's outstanding common stock, therefore Circle has significant influence over Birch. As per the equity method, Circle should report its share of Birch's income and dividends, which is $120,000 (40% of $300,000) for income and $40,000 (40% of $100,000) for dividends. Therefore, the correct option is C.

Exhibit 15-1 on January 1, 2010, Circle Corporation Paid $900