On January 1, 2013, Julie Corp. acquired a 10% interest in Mizz Enterprises. On January 1,

2014, Julie acquired an additional 20% Mizz's common stock. No goodwill resulted from either

purchase. Mizz reported net incomes of $600,000 and $650,000 for 2013 and 2014, respectively.

Dividends paid by Mizz amounted to $200,000 in 2013 and $350,000 in 2014. What amount of

Equity Income should be reported by Julie Corp in 2014?

a.

$52,500

b.

$97,500

c.

$117,500

d.

$72,500

Answer:

b

The answer is B, but I do not understand why.