Question

Moss Corp. owns 20°/o of Dubro Corp.'s preferred stock and 40o/o of its common stock. Dubro's stockoutstanding at December 31, Year 1, is as follows:10°/o cumulative preferred stockCommon stock$100,000700,000Dubro reported net income of $60,000 and paid dividends of $10,000 to its preferred shareholders for theyear ended December 31, Year 1. How much total revenue should Moss record due to its investment inDu bro?a. $22,000b. $20,000c. $70,000d. $50,000

Answer 1

Answer:

a. $22,000

Explanation:

Provided information we have,

Investment details in Dubro Corp.

20% in preferred stock

40% in Common stock

Provided net income = $60,000 and dividend to preference stock = $10,000

Therefore, net income after dividend = $60,000 - $10,000 = $50,000

Dividend on preference shares = $10,000 $\times$ 20% = $2,000

Share in net income = $50,000 $\times$ 40% = $20,000

Total part of income to be added in income statement = Dividend on preference capital + share of net income = $2,000 + $20,000 = $22,000

Therefore, correct option is

a. $22,000