An investor company with a 40% interest in an investee properly used the equity method to account for the investment.If the entries to the Investment account for the current year showed a debit of $45,000 and a credit of $22,000,the investee must have paid total dividends of:

Question

Quizplus · Accepted Answer

The investor's share of the investee's net income is $45,000 - $22,000 = $23,000. The investor's share of the investee's dividends is 40% x $23,000 = $9,200. The investee must have paid total dividends of $9,200 / 40% = $23,000.

An Investor Company with a 40% Interest in an Investee