On January 1,2014,Rod Corporation purchased 35% of the outstanding stock of Alamo Corporation for $500,000.Net income reported by Alamo for 2014 was $200,000.Dividends paid by Alamo during 2014 were $40,000.The amount of investment revenue that Rod should recognize for 2014 is:

Question

Quizplus · Accepted Answer

Rod Corporation should recognize investment revenue based on its share of Alamo's net income. With a 35% ownership, Rod's share of Alamo's $200,000 net income is 35% of $200,000, which equals $70,000.

On January 1,2014,Rod Corporation Purchased 35% of the Outstanding Stock