Eglin Company owns 30% interest in the stock of Bosco Corporation. During the year, Bosco pays $10,000 in dividends to Eglin, and reports a net loss of $200,000. Eglin Company's investment in Bosco will affect Eglin net income by a
A) $10,000 increase.
B) $60,000 increase.
C) $60,000 decrease.
D) $10,000 decrease.

Question

Quizplus · Accepted Answer

As Eglin Company owns only a 30% interest in Bosco Corporation, the losses will affect Eglin's net income by $60,000 (30% of the $200,000 net loss). Since the dividends received from Bosco are not enough to offset this loss, there will be a net decrease of $50,000 in Eglin's net income from their investment in Bosco.

Eglin Company Owns 30% Interest in the Stock of Bosco