On March 31, 2021. Pyramid Company acquired 40% of the shares of Casting Company Pyramid
On March 31, 2021. Pyramid Company acquired 40% of the shares of Casting Company Pyramid paid $3,000,000 for the investment, and that amount is exactly equal to 40% of the book value of identifiable net assets on Casting's balance sheet Casting recognized net income of $2,000,000 and paid $600,000 of dividends for 2021. After all closing entries are made for the year ended December 31, 2021. Pyramid's investment revenue for the year would be
$800,000
$600.000
$1,000.000
$3,130.000
Homework Answers
| SOLUTION: | |||
| Pyramid Company acquired 40% of Casting company | |||
| Value of investment = | $ 3,000,000 | ||
| Share of income in Dividends = $ 600,000 X 40% = | $ 240,000 | ||
| This dividend received Is reduced from the investment value of $ 3,000,000 | |||
| So Dividend received from investment is not taken as investment revenue | |||
| Calculation of Pyramid's Investment Revenue | |||
| Net income of Casting | $ 2,000,000 | ||
| Holding % of Pyramid = | 40% | ||
| Investment Revenue = $ 2,000,000 X 40% = | $ 800,000 | ||
| Answer = Option A = $ 800,000 | |||
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On March 31, 2021. Pyramid Company acquired 40% of the shares of Casting Company Pyramid
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