On January 1, 20X4, Pony Company acquired 25% of Stallion Company's common stock at underlying book...

On January 1, 20X4, Pony Company acquired 25% of Stallion Company's common stock at underlying book value of $200,000. Stallion has 80,000 shares of $10 par value, 6 percent cumulative preferred stock outstanding. No dividends are in arrears. Stallion reported net income of $270,000 for 20X4 and paid total dividends of $140,000. Pony uses the equity method to account for this investment.

Based on the preceding information, what amount of investment income will Pony company report from its investment in Stallion for the year?

A) $140,000

B) $67,500

C) $55,500

D) $35,000

The answer is C) $55,500. Please explain how to get this answer!

Expert Solution

ekkarill92 answered 2 years ago

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On January 1, 20X4, Pony Company acquired 25% of Stallion Company's common stock at underlying book...

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