Tesla Corp. purchased 45% of the outstanding shares of Electric Corp. for $1,845,000. The investment allows Tesla to exert significant influence over the operations of Electric. During 2021Electric recognized net income of $2,500,000 and paid $650,000 in dividends. Which of the following statements is true?

	a.	Income Statement - Tesla would report its share of Electric's dividends ($292,500) as income from investment.
	b.	Cash Flow Statement - Tesla would need to subtract its share of income and add back its share of dividends in cash flow from operations.
	c.	Tesla should use the equity method to account for its investment in Electric.
	d.	Balance Sheet - The investment would appear at the following amount: $1,845,000 +1,125,000share of income -292,500 share of the dividends $2,677,500

Answer rating: 100% (QA)

Equity method of accounting When a business organization holds an investment in a separate business ... View the full answer