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7 April, 18:14

Magnus Tech owns 30% of Mirika Inc. and accounts for the investment using the equity method. During the year, Mirika reports a net loss of $2,500,000 and pays total dividends of $70,000. Which of the following describes the change in Magnus' investment in Mirika during the year? A. The investment decreases by $771,000B. The investment decreases by $2,430,000C. The investment increases by $21,000D. The investment decreases by $735,000

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  1. 7 April, 21:31
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    A. The investment decreases by $771,000

    Explanation:

    As per the question the following details are given below : -

    Net loss = $2,500,000

    Total Dividend = $70,000

    Owning Percentage = 30%

    The computation of during the year is given below:-

    Net loss + Total Dividend x Owning Percentage

    = ($2,500,000 + $70,000) x 30%

    = $2,570,000 x 30%

    = $771,000

    So, the Magnus investment in Mirika inc. reduces by $771,000
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