Daniels Corporation reports its income from investments under the equity method and recognized income of $15,000 from its investment in Travis Company during the current year. Travis declared no dividends during the current year. On Daniels' statement of cash flows the $15,000 would
A) be shown as cash from investing activities.
B) be shown as an addition to net income in the reconciliation of net income to cash from operations.
C) be shown as a deduction from net income in the reconciliation of net income to cash from operations.
D) not be shown.

Question

Quizplus · Accepted Answer

Under the equity method, income is recognized when earned even if no dividends are received. Therefore, the income of $15,000 should be deducted from net income in the reconciliation of net income to cash from operations on the statement of cash flows.

Daniels Corporation Reports Its Income from Investments Under the Equity