Answered: Ma1. Investor owns 10% of Investee…

Financial Reporting, Financial Statement Analysis and Valuation

8th Edition

ISBN:9781285190907

Author:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw

Publisher:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw

Chapter8: Investing Activities

Section: Chapter Questions

Problem 11QE

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Ma1.

Investor owns 10% of Investee shares and has the ability to exert significant influence. In 2022 Investee reported net income of $800,000 and paid cash dividends of $120,000.

1.. If Investor uses the indirect method to present the activities operational:

a. It will add $80,000

b. It will add $12,000

c. Will subtract $68,000

d. It will add $68,000

2. If Investor uses the direct method to present the activities operational:

a. It will add $80,000

b. It will add $12,000

c. Will subtract $68,000

d. It will add $68,000

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