Question

Anchor Co owns 40% of Main Co's common stock outstanding and 75% of Main's noncumulative preferred stock outstanding Archor exercises significant influence over Main's operations. During the current period, Main declared dividends of S200,000 on its common stock and 5100 000 on its noncumulative preferred stock. What amount of dividend income should Anchor report on Yts income statement for the current penod related to its investment in Main?

A. $75000
B. S80000
C. S120000
D. S225000

Answer 1

Anchor Co should report a dividend income of S80,000 on its income statement related to its investment in Main.

Step-by-step explanation:

Anchor Co should report a dividend income of S80,000 on its income statement related to its investment in Main.

To determine the dividend income, we need to calculate the dividends received from the common stock and the noncumulative preferred stock separately. As Anchor owns 40% of Main's common stock, it would receive 40% of the S200,000 dividend declared on the common stock, which is S80,000. Additionally, as Anchor owns 75% of Main's noncumulative preferred stock, it would receive 75% of the S100,000 dividend declared on the preferred stock, which is also S80,000. Therefore, the total dividend income reported by Anchor on its income statement would be S80,000.