Working backward from consolidated income statements. Dealco Corporation published a consolidated income statement for the year, shown in Exhibit 11.10. The unconsolidated affiliate retained 25 percent of its earnings of $140 million during the year, having paid out the rest as dividends. The consolidated subsidiary earned $280 million during the year and declared no dividends.

EXHIBIT 11.10 DEALCO CORPORATION Consolidated Income Statement

(Exercise 22)

REVENUES Sales Equity in Earnings of Unconsolidated Affiliate . .

Total Revenues EXPENSES Cost of Goods Sold (excluding depreciation)

Administrative Expense Amortization Depreciation Expense of Goodwill Income Tax Expenses:

Currently Deferred Payable Total Income Expenses of the Consolidated Group Less Minority Interest in Earnings of Consolidated Net Subsidiary Income to Shareholders

$1,400,000 56,000

$1,456,000

$ 910,000 140,000 161,000 7,000

$ 58,800 14,000 72,800

$1,290,800

$ 165,200

(42,000)

$ 123,200

a. What percentage of the unconsolidated affiliate does Dealco Corporation own?

b. What dividends did Dealco Corporation receive from the unconsolidated affiliate during the year?

c. What percentage of the consolidated subsidiary does Dealco Corporation own?

EXERCISES