Orlov Corporation purchased 8,000 shares of Matsey Corporation common stock for $40 per share on January 1,2009.Matsey reported net income of $110,000 for 2009 and paid dividends of $45,000 during 2009.As of December 31,2009,the market value of Matsey Corporation common stock was $40 per share.Assuming the shares owned by Orlov represent 30 percent of the total outstanding stock of Matsey,the entry to record the recognition of income by Orlov Corporation is:

Question

Quizplus · Accepted Answer

Orlov Corporation owns 30% of Matsey, which means it should use the equity method. Under this method, Orlov recognizes 30% of Matsey's net income as its own income, which is $33,000 (30% of $110,000).

Orlov Corporation Purchased 8,000 Shares of Matsey Corporation Common Stock Cash 33,000 Dividend Income 33,000\begin{array}{llr} \text { Cash } &33,000\\ \text { Dividend Income } &&33,000\\\end{array} Cash Dividend Income ​33,000​33,000​

Orlov Corporation Purchased 8,000 Shares of Matsey Corporation Common Stock $\begin{array}{llr} \text { Cash } &33,000\\ \text { Dividend Income } &&33,000\\\end{array}$