Chase Company owns 80% of Lawrence Company and 40% of Ross Company. Lawrence Company also owns 30% of Ross Company. Separate operating incomes for 2011 of Chase, Lawrence, and Ross are $450,000, $300,000, and $250,000, respectively. Each company also retains a $20,000 unrealized gain in their current income figures. Annual amortization expense of $15,000 is assigned to Chase's investment in Lawrence and another $15,000 is assigned to Lawrence's investment in Ross.
-Compute Chase's attributed ownership in Ross.
A) 40%.
B) 64%.
C) 24%.
D) 32%.
E) 12.8%.

Question

Quizplus · Accepted Answer

Chase's attributed ownership in Ross is calculated by adding its direct ownership (40%) and its indirect ownership through Lawrence. Since Chase owns 80% of Lawrence, and Lawrence owns 30% of Ross, the indirect ownership is 80% of 30%, which is 24%. Therefore, Chase's total attributed ownership in Ross is 40% + 24% = 64%.

Chase Company Owns 80% of Lawrence Company and 40% of Ross