Question

# On July 1, 2018, Tremen Corporation acquired 35% of the shares of Delany Company. Tremen paid...

On July 1, 2018, Tremen Corporation acquired 35% of the shares of Delany Company. Tremen paid \$3,120,000 for the investment, and that amount is exactly equal to 35% of the book value of identifiable net assets on Delany's balance sheet. Delany recognized net income of \$1,000,000 for 2018, and paid \$180,000 of dividends each quarter to its shareholders. After all closing entries are made, Tremen's "Investment in Delany Company" account would have a balance of:

Multiple Choice

• \$3,666,000.

• \$3,407,000.

• \$3,295,000.

• \$3,169,000.

Solution:

The balance of investments of Tremen corporation in Delay company is calculated belows:

 Particulars Amount Amount Amount paid to acquire investments \$3,120,000 Add: Share in income after dividends Net income \$1,000,000 Less: Yearly dividends(\$180,000*4) (\$720,000) Income after dividends \$280,000 Share in income after dividends for 6 months (\$280,000*35%*6/12) \$49,000 Balance of investments of tremen corporation \$3,169,000

Hence, the blance of investments of Tremen corporation in Delay company is \$3,169,000

Correct option is \$3,169,000

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