Power Corporation acquires 30% of the outstanding voting common shares of the Inroad Corporation for $600,000.Power Corporation acquires the investment in Inroad Corporation by buying previously issued shares of Inroad Corporation from other investors. Power Corporation records income earned by Inroad Corporation as a(n) _____, while the dividend _____, and _____ account.

Question

Quizplus · Accepted Answer

Power Corporation uses the equity method for accounting since it owns 30% of Inroad Corporation. Under this method, income earned by Inroad increases the investment account, while dividends received are considered a return of investment, thus decreasing the investment account.

Power Corporation Acquires 30% of the Outstanding Voting Common Shares