Question

Pharoah Corporation purchased 29000 shares of common stock of the Sherman Corporation for $44 per share on January 2, 2020. Sherman Corporation had 100000 shares of common stock outstanding during 2021, paid cash dividends of $154000 during 2021, and reported net income of $540000 for 2021. Pharoah Corporation should report revenue from investment for 2021 in the amount of _______.

Answer 1

$201,260

Step-by-step explanation:

Total number of shares purchased for Sherman corporation is 29,000 at the rate of $44 each

Outstanding number of shares for Sherman corporation is 100,000

Therefore, the amount of investment is calculated by dividing the total number of shares by the outstanding number of shares

= 29,000/100,000

=0.29 × 100

= 29%

Amount of dividend in Sherman corporation is $154,000

Net income of Sherman corporation is $540,000

The total revenue generated by Pharoah corporation is

= 29/100 × ($154,000+$540,000)

= 0.29 × 694000

= $201,260

Thus,Pharaoh Corporation should report revenue from investment for 2021 in the amount of $201,260

Answer 2

Pharoah Corporation should report revenue from investment for 2021 in the amount of $156,600

Step-by-step explanation:

In order to calculate the amount Pharoah Corporation should report revenue from investment for 2021 we would have to use the following formula:

Pharoah Corporation's revenue from investment =reported net income*Pharoah Corporation's share in Sherman

Pharoah Corporation's share in Sherman = 29,000 / 100,000 = 29%

Therefore, Pharoah Corporation's revenue from investment =$540,000 * 29%

Pharoah Corporation's revenue from investment = $156,600

Pharoah Corporation should report revenue from investment for 2021 in the amount of $156,600