Rich, Inc. acquired 30% of Doane Corp.'s voting stock on January 1, 2012 for $600,000. During 2012, Doane earned $240,000 and paid dividends of $150,000. Rich's 30% interest in Doane gives Rich the ability to exercise significant influence over Doane's operating and financial policies. During 2013, Doane earned $300,000 and paid dividends of $90,000 on April 1 and $90,000 on October 1. On July 1, 2013, Rich sold half of its stock in Doane for $396,000 cash. Before income taxes, what amount should Rich include in its 2012 income statement as a result of the investment? Question 24 options: $240,000. $150,000. $72,000. $45,000.

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Business

Armani Grimes

6 February, 15:34

Rich, Inc. acquired 30% of Doane Corp.'s voting stock on January 1, 2012 for $600,000. During 2012, Doane earned $240,000 and paid dividends of $150,000. Rich's 30% interest in Doane gives Rich the ability to exercise significant influence over Doane's operating and financial policies. During 2013, Doane earned $300,000 and paid dividends of $90,000 on April 1 and $90,000 on October 1. On July 1, 2013, Rich sold half of its stock in Doane for $396,000 cash. Before income taxes, what amount should Rich include in its 2012 income statement as a result of the investment? Question 24 options: $240,000. $150,000. $72,000. $45,000.

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Lindsay Beasley · Answer 1

= $72,000

Explanation:

During 2012, Doane earned $240,000. Rich, Inc has a 30% Interest in Doane Corp. So to calculate the amount Rich. Inc should report in the income statement we will calculate Rich, Inc. share in the amount earned by Doane.

Doane earned = $240,000

Rich's interest = 30%

$240,000 * 0.30 = $72,000

Before income taxes, the amount Rich Inc. should include in its 2012 income statement as a result of the investment is $72,000.