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oksian1 [2.3K]
2 years ago
13

Gaw Company owns 15% of the common stock of Trace Corporation and used the fair-value method to account for this investment. Tra

ce reported net income of $110,000 for 2013 and paid dividends of $60,000 on October 1, 2013. How much income should Gaw recognize on this investment in 2013?a. $ 16,500 b. $ 9,000 c. $ 25,500
Business
1 answer:
ivann1987 [24]2 years ago
6 0

Answer:

The correct answer is option (B).

Explanation:

According to the scenario, the given data are as follows:

Net income = $110,000

Dividends paid = $60,000

Common stock owns = 15%

So, we can calculate the income for particular investment by using following method:

Income to be recognized = Dividends paid × Common stock owned

by putting the value, we get

= $60,000 × 15%

= $60,000 × 0.15

= $9,000

Hence, the income to be recognized on this investment is $9,000.

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