I know why the answer is , but I don't have a 100% clear why the income for the last two quarters of $1,000 = (500 shr of income for last two quarters since it kept only 500 out of the 50,000 shares outstanding or 1%) is not included. I know that Pepper accounts for equity method only in the first half of the year, but shouldn't they recognize a percentage of income for the second half of the year under the cost method?
On January 1, Year 1, Pepper Company acquired 30% of the voting common stock of Salt, Inc. for $60 per share. Pepper was able to exercise significant influence over the affairs of Salt. Salt had 50,000 common shares outstanding on January 1, Year 1. On July 1, Year 1, Pepper sold all but 500 shares of its investment in Salt, Inc. Pepper held all 500 shares through year-end Year 1. Salt declared and paid a $1 per share common stock dividend on March 31, Year 1, and a $1.50 per share dividend on September 30, Year 1. Salt's net income was exactly $50,000 each quarter.
What amount of revenue should Pepper record for the Year 1 from this investment?
a.$15,250
b.$31,000
c.$30,750 CORRECT
d.$15,750
BEC - PASSED
AUD - 8/29/16
FAR - TBS
REG - TBS
.