Zwick Company bought 28,000 shares of the voting common stock of Handy Corporation in January 2009. In December, Hart announced $200,000 net income for 2009 and declared and paid a cash dividend of $2 per share on the 200,000 shares of outstanding common stock. Zwick Company's dividend revenue from Handy Corporation in December 2009 would be:

Question

Quizplus · Accepted Answer

Ownership share of 28,000 shares is 14%, which is less than 20%, so neither the equity method nor consolidation is appropriate. Thus, Zwick Company's dividend revenue from Handy Corporation in December 2009 would be calculated as:
28,000 shares × $2.00 per share = $56,000.

Zwick Company Bought 28,000 Shares of the Voting Common Stock