Question

Sunland Company owns 4600 of the 10000 outstanding shares of Oriole Corporation common stock. During 2021,...

Sunland Company owns 4600 of the 10000 outstanding shares of Oriole Corporation common stock. During 2021, Oriole earns $510000 and pays cash dividends of $156000.

If the beginning balance in the investment account was $960000, the balance at December 31, 2021 should be

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Answer #1
Percent of common stock owned by Sunland company = 4,600/10,000 = 46%
Revenue from investment in Oriole corporation = Net income of Oriole corporation x Percentage of common stock required
=$510,000 x 46%
=$234,600
Share of dividend from Oriole corporation = Dividend paid by Oriole corporation x Percentage of common stock required
=$156,000 * 46%
=$71,760
Balance in investment account at December 31 = Beginning balance in the investment account + Revenue from investment in Oriole corporation - Share of dividend from Oriole corporation
=$960,000 +$234,600 - $71,760
=$1,122,840
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