On January 1, 2021, Goyeche Corporation purchased 30% of the common shares of Grafenburg Limited for $ 400,000. During 2021, Grafenburg Limited paid cash dividends of $ 60,000 and had profit of $ 300,000. During the same period, Goyeche earned $ 500,000 and paid dividends of $ 125,000. Both corporations have a December 31 year end. Assuming Grafenburg is Goyeche's only equity investment, on its December 31, 2021 income statement, Goyeche would report which of the following?

Question

Quizplus · Accepted Answer

Goyeche owns 30% of Grafenburg, so it uses the equity method. It recognizes 30% of Grafenburg's profit as income from investment, which is 30% of $300,000, equaling $90,000.

On January 1, 2021, Goyeche Corporation Purchased 30% of the Common