Solved: How much was spud incs share of mashed potatos dividends, Accounting Basics

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How much was spud incs share of mashed potatos dividends

Problem

Spud Inc. invested $5,000,000 in Mashed Potato Co. for 30% of its outstanding stock. At the time of the purchase, Mashed Potato had a book value of $15,000,000. Mashed Potato pays out 75% of net income in dividends each year.

Use the information in the following T-account for the Equity Investment to answer the following questions.

Equity Investment

5,000,000

360,000

270,000

(a) How much was Spud Inc.'s share of Mashed Potato's net income for the year?

(b) How much was Spud Inc.'s share of Mashed Potato's dividends for the year?

(d) What was Mashed Potato's total dividends for the year?

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Accounting Basics: How much was spud incs share of mashed potatos dividends

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