Question

Slide Corporation reported net income for the current year of $370,000 and paid cash dividends of $50,000. Power Company holds 40 percent of the outstanding voting stock of Slide. However, another corporation holds the other 60 percent ownership and does not take Power’s input into consideration when making financing and operating decisions for Slide. What investment income should Power recognize for the current year?

Answer 1

Answer:

$20,000

Explanation:

Since Slide Company does not have any controlling interest which is ability to influence the decision making.

In Power Company, it should recognize the amount of below as dividend income in the current year,

50,000 * 40% = $20,000