The Zero Corp. acquired 30% of the common stock of Bar Corporation for $460,000

Question

The Zero Corp. acquired 30% of the common stock of Bar Corporation for $460,000 cash on January 1, 2014. At time of acquisition, Bar’s totalnet asset value (book value) was $1,100,000.

Assume the following information for Bar:

Given Zero’s ownership of Bar, what will be the dollar amount effect on Zero’s:

2014 net income: ____________________

2014 dividend income: ________________

What is on the balance sheet for the Investment in Bar at year end 2015?

Answer: _____________

Total Annual Earnings Total Annual Dividends Year End Market Value 2014 $100,000 $40,000 $1,200,000 2015 $ 90,000 $40,000 $1,000,000

Explanation / Answer

2014 Net Incoem => No effect on net income

2014 Dividend Income => (40000 /1100000 ) * 330000 => $12000

Balance sheet for the Investment in Bar => $460,000

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