On January 2, 2025, Big Inc. acquired 15% of Small Co.'s outstanding common stock for $62,400 and did not exercise significant influence. Small earned net income of $96,000 in 2025 and paid dividends of $36,000. The fair value of Big's investment was $80,000 at December 31, 2025. On January 2, 2026, Big bought an additional 10% of Small for $54,000. This second purchase gave Big the ability to significantly influence the decision making of Small. During 2026, Small earned $120,000 and paid $48,000 in dividends. As of December 31, 2026, Small reported a net book value of $468,000. At the date of the second purchase, Big concluded that Small Co.'s book values approximated fair values and attributed any excess cost to goodwill.

What amount of equity income should Big Inc. have reported for 2026?

Answer rating: 100% (QA)

Equity income for Big Inc in 2026 should be calculated using the equity method for signifi... View the full answer