2. Company A acquired 20% of the 1 million outstanding shares of company B on January 1.
During the year, company B earned $2 per share and had a dividend payout ratio of 50%. As
of December 31, company B shares were trading at a price of $10 per share. Under the equity
method, the impact on company A’s income statement for its investment in company B will
be closest to:
A. $100,000.
B. $200,000.
C. $400,000.
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