Diamond Investments,Inc.purchased 40% of the common stock of Ivory Corporation on March 1,2016.Ivory Corporation reports a net income of $675,000 for the year 2017.Which of the following is true of the balance sheet on December 31,2017?

Question

Quizplus · Accepted Answer

As Diamond Investments, Inc. owns 40% of Ivory Corporation, it will record its share of net income, which is $270,000 ($675,000 x 40%). This amount will increase Diamond Investments' equity in Ivory Corporation, and hence total equity on the balance sheet will increase.