Question

Ziegler Corporation purchased 25,000 shares of common stock of the Sherman Corporation for $40 per share on January 2, 2014. Sherman Corporation had 100,000 shares of common stock outstanding during 2015, paid cash dividends of $90,000 during 2015, and reported net income of $300,000 for 2015. Ziegler Corporation should report revenue from investment for 2015 in the amount of:

Answer 1

Ziegler Corporation should report revenue from investment for 2015 in the amount of $75,000

Step-by-step explanation:

given data

purchased = 25,000 shares

common stock = $40 per share

common stock outstanding = 100,000 shares

paid cash dividends = $90,000

net income = $300,000

to find out

revenue from investment for 2015 in the amount of

solution

we first get here Investment in Sherman Corporation that is

Investment = purchased ÷ common stock outstanding ..........................1

put here value

Investment =
`(25,000)/(100000)`

Investment = 25%

so that income from investment will be here we get

income from investment = 25% of net income ........................2

put here value

income from investment = 25% × $300,000

income from investment = 0.25 × $300,000

income from investment = $75,000

so Ziegler Corporation should report revenue from investment for 2015 in the amount of $75,000