Young Company owns 30% of the voting shares of Grill Corporation.During the year, Grill paid $20,000 in dividends and reported $100,000 in net earnings.How much will Young Company's net earnings increase as a result of their investment in Grill Corporation?

Question

Quizplus · Accepted Answer

Young Company owns 30% of the voting shares of Grill Corporation. Therefore, it is entitled to receive 30% of the dividends and 30% of the net earnings of Grill Corporation. 
Dividends: 30% of $20,000 = $6,000 
Net Earnings: 30% of $100,000 = $30,000 
Thus, Young Company's net earnings will increase by $30,000 as a result of their investment in Grill Corporation.

Young Company Owns 30% of the Voting Shares of Grill