Question

Cullumber Co. invested $1,100,000 in Riverbed Co. for 25% of its outstanding stock. Riverbed Co. pays out 30% of net income in dividends each year. Use the information in the following T-account for the investment in Riverbed to answer the following questions. Investment in Riverbed Co. 1,100,000 108,000 32,400
(a) How much was Cullumber Co.’s share of Sub Co.’s net income for the year?
Net income $Cullumber Co. invested $1,000,000 in Sub Co. for
(b) How much was Cullumber Co.’s share of Sub Co.’s dividends for the year?
Dividends $Cullumber Co. invested $1,000,000 in Sub Co. for
(c) What was Sub Co.’s total net income for the year?
Total net income $Cullumber Co. invested $1,000,000 in Sub Co. for
(d) What was Sub Co.’s total dividends for the year?
Total Dividends $Cullumber Co. invested $1,000,000 in Sub Co. for

Answer 1

Answer and Explanation:

The computation is shown below:

a. The net income is $108,000

b. The dividend for the year is $32,400

c. The total net income is

= $108,000 ÷ 0.25

= $432,000

d. And, the total dividend is

= $432,000 × 0.30

= $129,600

hence, the same would be considered and relevant too