EJERCICIO I INVESTMENT RECORDING METHODS Valle Alto Corp. is considering investing in Constancia Corp, but is unsure
Question:
EJERCICIO I INVESTMENT RECORDING METHODS
Valle Alto Corp. is considering investing in Constancia Corp, but is unsure about what level of ownership should be undertaken Valle Alto and Constancia have the following reported incomes:
| Valle Alto | Constancia |
SALES | $640,000 | $370,000 |
COST OF GOODS SOLD | 300,000 | 230,000 |
GROSS PROFIT | $340,000 | $140,000 |
SELLING AND ADMINISTRATIVE EXPENSES | 120,000 | 75,000 |
NET INCOME | $220,000 | $65,000 |
Constancia paid $15,000 in cash dividends to its investors.
Prepare a pro-forma Income Statement for Valle Alto Corp. that compares income under 10%, 20% and 70% ownership levels.
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Ownership Levels | 10% | 20% | 70% |
Sales | $ | $ | $ |
Cost of Goods Sold |
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Gross Profit |
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Selling & Administrative Expenses |
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Operating Income |
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Dividend Income |
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Investment Income |
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Net Income |
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Noncontrolling Interest |
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Controlling Interest |
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