Question

1)Bronco Corporation earns $800,000 of net income and pays cash dividends of $320,000 during 2020. Denver Corporation owns 3,000 of the 10,000 outstanding shares of Bronco Corporation. Assume Bronco Corporation stock has a fair value of $350 per share at 12/31/2020.    Follow the presumptions and general rule.

How much investment income should Denver report in 2020

$320,000.

$240,000.

$144,000.

$800,000.

2)

Bronco Corporation earns $800,000 of net income and pays cash dividends of $320,000 during 2020. Denver Corporation owns 3,000 of the 10,000 outstanding shares of Bronco Corporation. Assume Bronco Corporation stock has a fair value of $350 per share at 12/31/2020.   Follow the presumptions and general rule.

What amount should Denver show in the investment account at December 31, 2020 if the beginning of the year balance in the account was $960,000?

		$1,176,000.
		$960,000.
		$1,104,000.
		$1,440,000.
		$1,050,000

Answer 1