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Desmond Corporation owns 3,000 of the 10,000 outstanding ordinary shares of Wetmore Corporation.During 2011, Wetmore earned £2,400,000 and paid cash dividends of £800,000.
-How much investment revenue should Desmond report in 2011?

Question

Use the following information for questions 
Desmond Corporation owns 3,000 of the 10,000 outstanding ordinary shares of Wetmore Corporation.During 2011, Wetmore earned £2,400,000 and paid cash dividends of £800,000.
-How much investment revenue should Desmond report in 2011?

Quizplus · Accepted Answer

Desmond Corporation owns 30% (3,000/10,000) of Wetmore Corporation, so their share of Wetmore's earnings is £720,000 (30% of £2,400,000). Investment revenue is earned from the ownership of stocks or investments, so Desmond should report £720,000 as investment revenue for their ownership of Wetmore shares in 2011. The £800,000 dividend payment is not reported as investment revenue, but rather as a separate cash inflow from Wetmore Corporation.

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