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Wildhorse Corporation purchased 34000 shares of common stock of the Sherman Corporation for $49 per share on January 2, 2017


Wildhorse Corporation purchased 34000 shares of common stock of the Sherman Corporation for $49 per share on January 2, 2017. Sherman Corporation had 100000 shares of common stock outstanding during 2018, paid cash dividends of $159000 during 2018, and reported net income of $590000 for 2018.  Wildhorse Corporation should report revenue from investment for 2018 in the amount of

  • $220660 

  • $146540

  • $54060 

  • $200600

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Answer #1

Answer: C) $54,060

Since Wildhorse corporation holds 34,000 shares of Sherman corporation (ie: 34% of the shares) ((34000/100000)*100)

Total cash dividends paid by Sherman corporation = $159,000

Cash Dividend received by Wildhorse = 34% x $159,000 = $54,060

Thus the revenue to be recognized by wildhorse shall be $54,060

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