On January 1, 2020, Ildiko Corporation purchased a 35% interest in the common shares of Rance Ltd. for $60,000. Rance Ltd. reported profit and paid dividends as follows: 2020 - profit $40,000; dividends paid $50,000

2021 - profit $85,000; dividends paid $70,000. Assume that Ildiko Corporation uses the equity method to account for its investment in Rance Ltd.

-A controlling influence over the investee is based on the investor owning voting shares exceeding
A)10%
B)20%
C)30%
D)40%
E)50%

Question

On January 1, 2020, Ildiko Corporation purchased a 35% interest in the common shares of Rance Ltd. for $60,000. Rance Ltd. reported profit and paid dividends as follows: 2020 - profit $40,000; dividends paid $50,000

2021 - profit $85,000; dividends paid $70,000. Assume that Ildiko Corporation uses the equity method to account for its investment in Rance Ltd.

-A controlling influence over the investee is based on the investor owning voting shares exceeding
A)10%
B)20%
C)30%
D)40%
E)50%

Quizplus · Accepted Answer

A controlling influence over the investee is based on the investor owning voting shares exceeding 50%, which means option E is the correct answer. The other options (10%, 20%, 30%, and 40%) do not constitute a controlling influence over the investee.

On January 1, 2020, Ildiko Corporation Purchased a 35% Interest