Answer:
Net income from July 1 to 31 December 2018 750,000
Less; Dividend paid ($180,000 x 2) <u>360,000</u>
Net income after dividend <u>390,000</u>
Tremen's share of net income = 40% x $390,000 = $156,000
Tremen's Total investment = $3,000,000 + $156,000 = $3,156,000
The correct answer is D
Explanation:
In this regard, we will determine the net income for 6 months (July 1 to December 31), which is $1,500,000 divided by 2. Then, we will derive the dividend paid for the remaining 2 quarters of the year, which is $180,000 multiplied by 2. We will deduct the dividend paid for the remaining two quarters from the net income for 6 months. Thereafter, we will multiply the net income after dividend by 40%, which is Tremen's stake in the company. Finally, we will add Tremen's share of net income to his initial investment of $3,000,000.
