Asked Jan 20, 2020

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


Expert Answer

Step 1

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

Accounting homework question answer, step 1, image 1
Step 2

Calculate the dividends earned by Company W from company R.

Accounting homework question answer, step 2, image 1
Step 3

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

Accounting homework question answer, step 3, image 1

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