On January 1, 20X4, Griffin, Inc. purchased 12% of Hydra Co.\'s common stock. At

Question

On January 1, 20X4, Griffin, Inc. purchased 12% of Hydra Co.'s common stock. At that time Griffin did not have the ability to exert significant influence over Hydra. On September 1, 20X4, Griffin purchased additional Hydra shares, bringing its ownership up to 35% of Hydra's common stock outstanding. During December 20X4. Hydra declared and paid a cash dividend on all of its outstanding common stock. Griffin uses the equity method to account for its investment in Hydra. How much income from the Hydra investment should Griffin's 20X4 income statement report? 12% of Hydras income for January 1 to August 31, 20X4, plus 35% of Hydra's income for September 1 to December 31, 20X4. 35% of Hydra's income for September 1 to December 31, 20X4 only. 35% of Hydra's 20X4 income. Amount equal to dividends received from Hydra. O O

Explanation / Answer

12% of Hydra’s income for January 1 to August 31, 20X4, plus 35% of Hydra’s income for September 1 to December 31, 20X4. Option 1 is correct

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