Mouns Company owns 40% interest in the shares of Darian Corporation. During the year, Darian pays $20,000 in dividends to Mouns, and reports $100,000 in net income. Mouns Company's investment in Darian will increase Mouns' net income by

Question

Quizplus · Accepted Answer

Mouns Company owns 40% of Darian Corporation, so it recognizes 40% of Darian's net income. 40% of $100,000 is $40,000, which is the amount by which Mouns' net income increases. The dividends received do not affect the net income under the equity method.

Mouns Company Owns 40% Interest in the Shares of Darian