Question #37

Reading: Reading 8 Intercorporate Investments

PDF File: Reading 8 Intercorporate Investments.pdf

Page: 16

Status: Correct

Correct Answer: A

Part of Context Group: Q37-39 First in Group
Shared Context
- Assuming the equity method of accounting is used, what will be the reported investment income for Birch? A) $60,000.00. B) $175,000.00. C) $115,000.00.
Question
Assuming the equity method of accounting is used, what will be the cash flow received by Birch, due to their investment in TRQ?
Answer Choices:
A. $65,400
B. $227,500
C. $52,500
Explanation
The cash flow to Birch will be the dividend received ($700,000)(0.30)(0.25) = $52,500.
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