Bing Company owns 30% interest in the stock of Yeti Corporation. During the year, Yeti pays $75,000 in dividends to Bing, and reports $400,000 in net income. Bing Company's investment in Yeti will increase Bing net income by
A) $120,000.
B) $97,500.
C) $75,000.
D) $22,500.

Question

Quizplus · Accepted Answer

Bing Company owns 30% of Yeti Corporation, so it recognizes 30% of Yeti's net income as its own, which is $400,000 * 30% = $120,000. Dividends received do not affect net income under the equity method.

Bing Company Owns 30% Interest in the Stock of Yeti