On January 1, 2016, Arch Ltd. purchased 30% of the common shares of AP Inc. for $1,700,000.
Question:
On January 1, 2016, Arch Ltd. purchased 30% of the common shares of AP Inc. for $1,700,000. In 2016, AP reported net income of $880,000 and paid dividends of $600,000.
Required:
a. Which of the following conditions must be met for Arch to use the equity method to report its investment in AP?
i. Arch owns at least 20% of the voting shares of AP.
ii. Arch has control over AP.
iii. Arch has a significant interest in AP.
iv. Arch is able to exercise significant influence over AP.
b. How much income would be reported by Arch in 2016 for its investment in AP under the equity method?
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Step by Step Answer:
a The best answer is iv The criterion for using the equity method ...View the full answer
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