Ramiro Company purchased 40% of the outstanding stock of Marco Company on January 1. Marco reported net income of $90,500 and declared dividends of $21,500 during the year. How much would Ramiro adjust its investment in Marco Company under the equity method

Explanation:

Given the following :

Purchased outstanding stock by Ramiro= 40%

Marco net income = $90,500

Marco dividend = $21,500

From the information above, under the Equity method, Purchasing a percentage share of a stock entitles the buyer to partial ownership of the company. With Ramiro's 40% purchase of Marco's outstanding stock, Ramiro is entitled to 40% of Marco's net income and dividend.

Therefore ;

40% of net income :

0.4 × $90,500 = $36,200(Ramiro's share of net income)

40% of dividend :

0.4 × $21,500 = $8600(Ramiro's share of dividend)

Ramiro's adjustment = $(36,200 - 8600) = $27,600

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hope i explained myself

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