Pratt Corporation owns 75 percent of Swan Corporation's outstanding common stock.Swan,in turn,owns 15 percent of Pratt's outstanding common stock.What percent of the dividends paid by Pratt is reported as dividends declared in the consolidated retained earnings statement?

Question

Quizplus · Accepted Answer

The portion of dividends paid by Pratt Corporation to Swan Corporation that is attributable to Swan's ownership in Pratt is eliminated in the consolidation process. Therefore, only the portion of dividends paid by Pratt that is attributable to the 25 percent ownership not held by Swan is reported as dividends declared in the consolidated retained earnings statement. This amounts to 85 percent (100 percent - 15 percent) of the dividends declared by Pratt.

Pratt Corporation Owns 75 Percent of Swan Corporation's Outstanding Common