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6 May, 17:45

On January 1, 2017, Alpha Company purchased a significant influence shares investment in the Bravo-Zulu Company for $250,000. This investment balance represents 25% of the equity of the Bravo-Zulu Company. During 2017, Bravo-Zulu Company reported Net Income of $25,000 on November 15, 2017 Bravo-Zulu Company paid cash dividends of $10,000 to its shareholders. Using this information, what are the FY 2017 balances in Alpha Company's account balances for: a. Investment in Bravo-Zulu b. Investment Income

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  1. 6 May, 18:44
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    a) $253,750

    b) $6,250

    Explanation:

    Alpha company purchased shares in Bravo-Zulu company for $250,000

    This represents 25% of the equity of Bravo-Zulu company.

    In 2017, Bravo-Zulu Company Net Income = $25,000 on November 15, 2017 Bravo-Zulu Company paid cash dividends of $10,000 to its shareholders.

    The FY 2017 balances in Alpha Company's account balances are:

    a) For investment in Bravo-Zulu

    = $250,000 + net income - share in dividend.

    = $250,000 + ($25,000 * 25%) - ($10,000 * 25%)

    = $250,000 + $6,250 - $2,500

    = $253,750

    b) For investment income

    = $25,000 * 25%

    = $6,250
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