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Altadore Ltd.acquired 30% of Dorset Corp.'s common shares on January 1, 2011 for $240,000.During 2011, Dorset earned $100,000 and paid dividends of $60,000.Altadore's 30% interest in Dorset gives Altadore the ability to exercise significant influence over Dorset 's operating and financial policies.During 2012, Dorset earned $120,000 and paid dividends of $40,000 on April 1 and $40,000 on October 1.On July 1, 2012, Altadore sold half of its shares in Dorset for
$158,000 cash.
-Before income taxes, what amount should Altadore include in its 2011 income statement as a result of the investment?

Question

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Altadore Ltd.acquired 30% of Dorset Corp.'s common shares on January 1, 2011 for $240,000.During 2011, Dorset earned $100,000 and paid dividends of $60,000.Altadore's 30% interest in Dorset gives Altadore the ability to exercise significant influence over Dorset 's operating and financial policies.During 2012, Dorset earned $120,000 and paid dividends of $40,000 on April 1 and $40,000 on October 1.On July 1, 2012, Altadore sold half of its shares in Dorset for
$158,000 cash.
-Before income taxes, what amount should Altadore include in its 2011 income statement as a result of the investment?

Quizplus · Accepted Answer

Altadore should include its share of Dorset's earnings of $30,000 ($100,000 x 30%) in its 2011 income statement. The dividends received in 2011 do not affect the income statement.

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