Aroma Limited owns a 25% interest in the shares of Baltic Corporation.During the year, Baltic pays $10,000 in dividends to Aroma and reports $100,000 net income.Aroma's investment in Baltic will increase Aroma's net income by

Question

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Aroma Limited owns a 25% interest in Baltic Corporation, which means it should use the equity method to account for its investment. Under the equity method, Aroma's share of Baltic's net income is 25% of $100,000, which is $25,000. Dividends received do not affect net income under the equity method.

Aroma Limited Owns a 25% Interest in the Shares of Baltic