Dobson Inc.earns €450,000 and pays cash dividends of €150,000 during 2011.Cornwell Corporation owns 70,000 of the 210,000 outstanding shares of Dobson. How much revenue from investment should Cornwell report in 2011?

Question

Quizplus · Accepted Answer

Cornwell owns 1/3 of Dobson (70,000/210,000) and is entitled to 1/3 of the dividends paid, which is €50,000 (€150,000 x 1/3). In addition, Cornwell's share of Dobson's earnings is €150,000 (€450,000 x 1/3). Therefore, Cornwell's total revenue from investment in Dobson for 2011 is €200,000 (€50,000 + €150,000), which is option C.