Use the following information for questions 105 and 106.
Brown Corporation earns $480,000 and pays cash dividends of $160,000 during 2014. Dexter Corporation owns 3,000 of the 10,000 outstanding shares of Brown.
-How much investment income should Dexter report in 2014?

Question

Quizplus · Accepted Answer

Dexter owns 30% (3,000/10,000) of the outstanding shares of Brown Corporation. Therefore, Dexter should report investment income of 30% of the dividends paid, or $48,000 ($160,000 x 0.3). However, it's important to note that investment income is only recognized when dividends are declared and paid, so if Brown Corporation did not pay any dividends in a given year, Dexter would not report any investment income for that year.

Use the Following Information for Questions 105 and 106