Callie Tarres is the general manager of Brennon Company, which provides data-management services for physicians in the Columbus, Ohio, area. Brennon Company is having a rough year. Net income trails projections for the year by almost $75,000. This shortfall is especially important because Brennon plans to issue stock early next year and needs to show investors that the company can meet its earnings targets.

Brennon holds several investments purchased a few years ago. Even though investing in stocks is outside of Brennon’s core business of data management services, Tarres thinks these investments may help the company meet its net income goal for the year. She is considering what to do with the following investments:

1. Brennon owns 50% of the common stock of Ohio Office Systems, which provides the business forms Brennon uses. Ohio Office Systems has lost money for the past two years but still has a retained earnings balance of $550,000. Tarres thinks she can get the Ohio Office Systems’ treasurer to declare a $160,000 cash dividend, half of which would go to Brennon.

2. Brennon owns a bond investment purchased eight years ago for $250,000. The purchase price represents a discount from the bonds’ maturity value of $400,000. These bonds mature two years from now, and Brennon purchased them as a long-term investment intending to hold them until they matured. Their current market value is $380,000. Tarres has checked with an investment representative, and she is considering selling the bonds. The investment firm would charge a 1% commission on the sale transaction.

3. Brennon owns 5,000 shares of Microsoft stock valued at $73 per share as a long-term investment. One year ago, Microsoft stock was worth only $54 per share. Brennon purchased the Microsoft stock for $37 per share. Tarres wonders whether Brennon should sell the Microsoft stock.

Requirement

1. Evaluate all three actions as a way for Brennon Company to generate the needed amount of income. Recommend the best way for Brennon to achieve its net income goal.