Earnings from Available-for-Sale Securities Butter Company holds 4,000 shares of common stock of Zoltar Corporation and 7,000
Question:
Earnings from Available-for-Sale Securities Butter Company holds 4,000 shares of common stock of Zoltar Corporation and 7,000 shares of preferred stock of Rant Company. During 2000, Butter Company received dividends of $4 per share from Zoltar Corporation and $6 per share from Rant Company. Due to a decline in the stock market, the market price of the shares held by Butter decreased from $300,000 on January 1 to $276,000 on December 31, 2000. Both securities are carried in Butter’s available-for-sale investment portfolio.
a. If Butter reports income from operations of $245,000 for 2000, what amount of net income will it report for the year?
b. If Butter wishes to earn a 15 percent return on its stock investment, has it accomplished its goal in 2000?
Step by Step Answer:
Financial Accounting A Decision Making Approach
ISBN: 9780471328230
2nd Edition
Authors: Thomas E. King, Valdean C. Lembke, John H. Smith