Behnke Corp.owns a 10% interest in the common shares of DeLonghi Ltd.During this year, DeLonghi pays a total of $15,000 in dividends and reports $130,000 profit.Behnke's investment in DeLonghi will increase Behnke's profit by
A)$15,000.
B)$13,000.
C)$12,500.
D)$ 1,500.

Question

Quizplus · Accepted Answer

Behnke Corp. owns a 10% interest in DeLonghi Ltd., so it will receive 10% of the dividends paid, which is $1,500 (10% of $15,000). The profit reported by DeLonghi does not directly increase Behnke's profit unless Behnke uses the equity method, which is not applicable here due to the 10% ownership.