Question

Company A accounts for its investment in Company B under the equity method. Company A carried the Company B investment at $150,000 and $165,000 at December 31, 2020, and December 31, 2021, respectively. During 2021 Company B recognized $80,000 of net income and paid dividends of $30,000. Assuming that Company A owned the same percentage of Company B throughout 2021, its percentage ownership must have been:

Answer 1

Answer:

30%

Explanation:

Calculation for its percentage ownership

Percentage of ownership=($80,000 - $30,000)/$165,000

Percentage of ownership=$50,000/$165,000

Percentage of ownership = 30%

Therefore Assuming that Company A owned the same percentage of Company B throughout 2021, its percentage ownership must have been:30%