Answer: $1,306,800
Explanation:
In answering this question, we look at how much of that income, Cullumber still had on hand and then take the proportion that belongs to Dexter.
Cullumber Corporation earns $840,000 and pays cash dividends of $300,000 during 2021.
That means that after paying the dividends they are left with,
= 840,000 - 300,000
= $540,000
Now, Dexter owns 4200 out of 10,000 shares. That means they own,
= 4,200/10,000
= 42% of Cullumber Corporation stock.
If they own 42% of the stock, they are entitled to 42% of the income so,
= 42% * 540,000
= $226,800
Now we then add this figure to the opening balance,
= $1,080,000 + $226,800
= $1,306,800
$1,306,800 is the amount Dexter should show in the investment account at December 31, 2021.
