Viejo Inc. earns $600000 and pays cash dividends of $150000 during 2017. Cruz Corporation owns 73500 of the 210000 outstanding shares of Viejo. What amount should Cruz show in the investment account at December 31 2017 if the beginning of the year balance in the account was $40000?

Question

Quizplus · Accepted Answer

Cruz Corporation owns 35% of Viejo Inc. (73,500/210,000). Therefore, it should recognize 35% of Viejo's earnings and dividends. Earnings: $600,000 * 35% = $210,000. Dividends: $150,000 * 35% = $52,500. Increase in investment account: $210,000 - $52,500 = $157,500. Ending balance: $40,000 + $157,500 = $197,500.

Viejo Inc Earns $600000 and Pays Cash Dividends of $150000 During