# On January 2, 2016, Well Co. purchased 10% of Rea Inc.’s outstanding common shares for \$400,000. Well is the largest single shareholder in Rea, and Well’s officers are a majority on Rea’s board of directors. Rea reported net income of \$500,000 for 2016, and paid dividends of \$150,000. In its December 31, 2016, balance sheet, what amount should Well report as investment in Rea? a. \$435,000 b. \$450,000 c. \$400,000 d. \$385,000

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On January 2, 2016, Well Co. purchased 10% of Rea Inc.’s outstanding common shares for \$400,000. Well is the largest single shareholder in Rea, and Well’s officers are a majority on Rea’s board of directors. Rea reported net income of \$500,000 for 2016, and paid dividends of \$150,000. In its December 31, 2016, balance sheet, what amount should Well report as investment in Rea? a. \$435,000 b. \$450,000 c. \$400,000 d. \$385,000

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Step 1

Calculate the net income earned by company W from Company R.

Step 2

Calculate the dividends earned by Company W from company R.

Step 3

Calculate the amount that should be shown in the ...

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