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On 1/1/11, Vitale Co. invested $1,000,000 in Demo Co. for 25% of its outstanding stock....

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Accounting

On 1/1/11, Vitale Co. invested $1,000,000 in Demo Co. for 25% of its outstanding stock. The equity method of accounting is appropriate. Demo Co. pays out 40% of net income in dividends each year. Vitale received $50,000 in Demo dividends during 2011. What was Demo's 2011 Net Income?

Select one:

a. $500,000

b. $125,000

c. $87,500

d. $156,250

e. $111,111

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