Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

On 1/1/16, Delta purchased 15% of Alpha common stock for $62,000. Alpha's net income for the years ended December 31 2016 and 2017 were $18,000

On 1/1/16, Delta purchased 15% of Alpha common stock for $62,000. Alpha's net income for the years ended December 31 2016 and 2017 were $18,000 and $56,000 respectively. Alpha declared $2,000 in total dividends to all shareholders in 2016. In 2017, it declared total dividends of $3,000. On 12/31/16, the fair value of Alpha's stock that Delta owned had increased to $70,000; in 2017, it increased to $75,000.

Assume Delta sold all of its shares of Alpha for $75,000 at the end of 2017. Over the entire life of the transaction (from the time Delta bought the investment to the time it sold it), what is the total effect of this investment on Deltas net income for all years combined?

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Textbook Of Financial Accounting And Analysis

Authors: Gaurav Agrawal

1st Edition

9350840901, 9789350840900

More Books

Students also viewed these Accounting questions