Dobson Inc. earns $450,000 and pays cash dividends of $150,000 during 2010. Cornwell Corporation owns 70,000 of the 210,000 outstanding shares of Dobson.
What amount should Cornwell show in the investment account at December 31, 2010 if the beginning of the year balance in the account was $40,000?

Question

Quizplus · Accepted Answer

Dobson Inc. earned $450,000 and paid cash dividends of $150,000 during 2010. Cornwell Corporation owns 70,000 of the 210,000 outstanding shares of Dobson. Cornwell's share of Dobson's earnings is $450,000 * 70,000 / 210,000 = $150,000. Cornwell's share of Dobson's dividends is $150,000 * 70,000 / 210,000 = $50,000. Cornwell's investment account balance at December 31, 2010 is $40,000 + $150,000 - $50,000 = $140,000.