Sadavir Co. purchased 100% of the outstanding common stock of Errinwright, Inc. on 1/1/2X for $500,000 in cash and stock. Sadavir Co. accounts for the income of Errinwright, Inc., using the Cost Method, and during the year Errinwright, Inc. reported Net Income of $100,000 and declared and paid dividends of $45,000. Assuming no other transaction between the two companies, the balance in the "Investment Income from Errinwright, Inc." on the books of Sadavir Co. on 12/31/2X will be: Question 5 options: a) $100,000 b) $25,000 c) $30,000 $45,000
Sadavir Co. purchased 100% of the outstanding common stock of Errinwright, Inc. on 1/1/2X for $500,000 in cash and stock. Sadavir Co. accounts for the income of Errinwright, Inc., using the Cost Method, and during the year Errinwright, Inc. reported Net Income of $100,000 and declared and paid dividends of $45,000. Assuming no other transaction between the two companies, the balance in the "Investment Income from Errinwright, Inc." on the books of Sadavir Co. on 12/31/2X will be: Question 5 options: a) $100,000 b) $25,000 c) $30,000 $45,000
Chapter8: Consolidated Tax Returns
Section: Chapter Questions
Problem 25CE
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Transcribed Image Text:Sadavir Co. purchased 100% of the outstanding common stock of Errinwright, Inc. on 1/1/2X for $500,000 in cash and stock. Sadavir
Co. accounts for the income of Errinwright, Inc. using the Cost Method, and during the year Errinwright, Inc. reported Net Income of
$100,000 and declared and paid dividends of $45,000. Assuming no other transaction between the two companies, the balance in
the "Investment Income from Errinwright, Inc." on the books of Sadavir Co. on 12/31/2X will be:
Question 5 options:
a)
$100,000
b)
$25,000
c)
$30,000
$45,000
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