Assume the equity method is applied.How much equity income will Kaye report on its internal accounting records as a result of Fiore's operations?

Question

Quizplus · Accepted Answer

To calculate the equity income, we need to start with Fiore's net income which is $800. We then need to determine what percentage of Fiore's stock is owned by Kaye, which is 60%. Therefore, Kaye's portion of the net income is 60% x $800 = $480.

Next, we need to subtract the portion of Fiore's dividends that Kaye received, which is 20% x $100 = $20.

Finally, we arrive at the equity income, which is net income - dividends received = $480 - $100 = $380.

Assume the Equity Method Is Applied