1. Investor (Ace Corp.) and Investee’s Income Statement (before adjustment) is as below.

Account	Investor (Ace’s Corp) ’s Income Statement	Investee’s Income Statement
Sales	$500,000	$400,000
Less: COGS	(250,000)	(230,000)
Gross Profit	$250,000	$170,000
Less: S & A Expenses	(100,000)	(100,000)
Net Income	$150,000	$70,000

Assume that the investee company paid $20,000 in cash dividends. The investor, Ace Corp. would prepare the following income statements, depending on the level of ownership.

1. Please complete the Answer Sheet.

Ownership	15% (Passive)	40% (Influential)	70% (Controlling)
Sales	$500,000	$500,000
Less: COGS	(250,000)	(250,000)
Gross Profit	$250,000	$250,000
Less: S & A Exp.	(100,000)	(100,000)
Operating Income	$150,000	$150,000
Dividend Income
Investment Income
Net Income
Distribution of Income
Non-controlling Interest (30% x $70,000)
Controlling Interest (100% of $150,000 + 70% of $70,000)

2. What if the ownership is 100%?

Ownership	15% (Passive)	40% (Influential)	70% (Controlling)
Sales	$500,000	$500,000
Less: COGS	(250,000)	(250,000)
Gross Profit	$250,000	$250,000
Less: S & A Exp.	(100,000)	(100,000)
Operating Income	$150,000	$150,000
Dividend Income
Investment Income
Net Income
Distribution of Income
Non-controlling Interest (30% x $70,000)
Controlling Interest (100% of $150,000 + 70% of $70,000)