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alexgriva [62]
3 years ago
12

Turner Company owns 10% of the outstanding stock of ICA Company. During the current year, ICA paid a $5 million cash dividend on

its common shares. What effect did this dividend have on Turner’s 2016 financial statements? Explain the reasoning for this effect.
Business
1 answer:
lozanna [386]3 years ago
6 0

Answer:

Turnover Company

The net income of Turnover will increase by $500,000.

Explanation:

a) Data and Calculations:

Turner Company's shareholding in ICA = 10%

ICA pays dividend totalling $5 million

Turner's share of dividend = $500,000 ($5 million * 10%)

b) This is not based on equity accounting.  Instead, the investment will be reported at fair value.  Equity accounting method will be applied in recording Turner's investments in ICA Company, if the ownership interest is valued at 20–50% of the stock.

c) The $500,000 dividends received from ICA Company will be reported in the Income Statement of Turner Company as other income, unless Turner ordinarily buys and sells stocks.  The 10% shareholding does not amount to significant control or influence for the accounts of Turner and ICA to be consolidated.

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Answer: e. Interest rates on long-term bonds are more volatile than rates on short-term debt securities like T-bills.

Explanation:

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They are also more sensitive to inflation. If inflation rates rise, the value of payment reduces. It is for this reason that longer term bonds have maturity risk premiums added to them to cater for the amount of time the bond has till maturity.

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3 0
3 years ago
you inherit $10,000 with the stipulation that you for the first year the money must be invested in two stocks paying 6% and 11%
Crank

Answer:

At 6% $3,529.412 will be invested

At 11% $6,470.588 will be invested

Explanation:

Let x be the investment for 6% stock

And (10,000-x) is the investment it 11% stock

Let I be interest earned on both investments.

Using the formula

Principal(p)= Interest(I)*Rate(r)*Time(t)

p/RT= I

So considering both investments

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x/0.06= (10,000-x)/0.11

Cross-multiply

0.11x= 0.06(10,000-x)

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Rearranging

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= 6,470.588

8 0
2 years ago
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Answer:

<em>a. True</em>

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4 0
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