Vince Company purchased as a long- term investment common stock of Gill Company. During the current year Gill Company earned $4,000,000 and paid dividends of $1,000,000. Assume that Vince Company owns 40% of Gill Company. Gill Company's net income will affect Vince Company by:

Question

Quizplus · Accepted Answer

Vince Company owns 40% of Gill Company, so it will recognize 40% of Gill's net income, which is $1,600,000 (40% of $4,000,000), as an increase in its investment account under the equity method.

Vince Company Purchased as a Long- Term Investment Common Stock