Use the following information for questions 115 through 117.
Rich, Inc. acquired 30% of Doane Corporation's voting stock on January 1, 2014 for $800,000. During 2014, Doane earned $320,000 and paid dividends of $200,000. Rich's 30% interest in Doane gives Rich the ability to exercise significant influence over Doane's operating and financial policies. During 2015, Doane earned $400,000 and paid dividends of $120,000 on April 1 and $120,000 on October 1. On July 1, 2015, Rich sold half of its stock in Doane for $528,000 cash.
-Before income taxes, what amount should Rich include in its 2014 income statement as a result of the investment?

Question

Quizplus · Accepted Answer

- Rich's initial investment in Doane is recorded at cost: $800,000.
- Rich's share of Doane's income for 2014 is: 30% × $320,000 = $96,000 (included in income as investment income).
- Rich's share of Doane's dividends for 2014 is: 30% × $200,000 = $60,000.
- Therefore, the net impact on Rich's income statement for 2014 is $96,000 - $60,000 = $36,000, which is included in investment income.

Use the Following Information for Questions 115 Through 117