Dax purchased 200 of the 500 outstanding Minisoft Corporation common shares at $55 per share plus a $100 brokerage fee as an investment in an associate.If Minisoft has net income for the year of $50,000 and pays a dividend of $5/share,what information should Dax report on its income statement relating to the investment?

Question

Quizplus · Accepted Answer

Dax owns 40% of Minisoft (200 out of 500 shares), so he should report 40% of Minisoft's net income as earnings from the investment, which is $20,000 (40% of $50,000). Dividends are not reported as income under the equity method.

Dax Purchased 200 of the 500 Outstanding Minisoft Corporation Common