Question

Sheridan Corporation purchased 30000 shares of common stock of the Sherman Corporation for $45 per share on January 2, Year 17. Sherman Corporation had 100000 shares of common stock outstanding during 2018, paid cash dividends of $155000 during Year 18, and reported net income of $550000 for Year 18. Sheridan Corporation should report revenue from investment for Year 18 in the amount of

A $46,500.00
B $118,500.00
C $165,000.00
D $181,500.00

Answer 1

The correct option is A $46,500.00

Sheridan Corporation should report $46,500 as revenue from investment for Year 18, representing the portion of dividends received from its 30% stake in Sherman Corporation.

Step-by-step explanation:

You have asked how much revenue from investment the Sheridan Corporation should report for Year 18, considering its ownership of shares in the Sherman Corporation. Sheridan Corporation owns 30,000 out of 100,000 shares of Sherman Corporation, which represents a 30% ownership stake. The revenue from investment can be calculated by taking the proportion of total dividends and share of net income that correlates to Sheridan Corporation's stake in Sherman Corporation.

To compute the revenue from investment for Sheridan Corporation:

• Dividends received: Total dividends of $155,000 multiplied by the ownership percentage (30%) equals $46,500.
• Share of net income: Sheridan Corporation's share of Sherman Corporation's net income would involve complex equity method accounting since it's a significant stake, but that's beyond the provided information. It is not directly included in revenue from the investment without further details of the investment relationship.

Therefore, the revenue from investment that Sheridan Corporation would report is the dividends received, which is $46,500 (Option A).