On 7/1/06, Pynco acquired 100% of Synco's outstanding common stock when its retained earnings were $200,000. For the six months ended 12/31/06, Synco reported net income of $50,000 and declared dividends of $60,000. Under the cost method, what amount should the parent report in its 2006 income statement?

Question

Quizplus · Accepted Answer

Under the cost method, the parent company (Pynco) only reports the dividends received from the subsidiary (Synco) in its income statement. Therefore, Pynco should report $60,000 in its 2006 income statement. So, the correct answer is D) $60,000.

On 7/1/06, Pynco Acquired 100% of Synco's Outstanding Common Stock