Keller Jewelers purchased 3,000,000 of the outstanding 10,000,000 shares of Angel & Associates.Keller has significant influence over Angel,so Keller will account for this investment using the equity method.Angel declared Net Income of $1,250,000 for the year.How will Angel's Net Income impact Keller's books?

Question

Quizplus · Accepted Answer

Since Keller accounts for the investment using the equity method, it will record its share of Angel's net income as an increase to its Investment account and Income from Investment. The calculation is done by multiplying Keller's ownership percentage (30%) by Angel's net income ($1,250,000) resulting in an increase of $375,000 to both accounts. Therefore, choice A is correct. Choices B and C are incorrect because they do not account for the equity method, and choice D is incorrect because it does not reflect the impact on Income from Investment.

Keller Jewelers Purchased 3,000,000 of the Outstanding 10,000,000 Shares of Angel