Already tried d) and a). Both are incorrect. ECo holds 35% of the outstanding sh

Question

Already tried d) and a). Both are incorrect.

ECo holds 35% of the outstanding shares of ACo. You are given the following data: (For simplicity, assume that there is no goodwill, intangible assets, or profits from intercompany transactions.) Beginning book value of ECo's equity investment in ACo = $50 ACo's reported earnings for the year = $100 (Note that these are ACo's total earnings, not ECo's share of ACo's earnings.) Dividends declared and paid by ACo during the year = $40 (Note that these are ACo's total dividends, not ECo's share of ACo's dividends.) Which one of the following numbers equals the ending book value of ECo's equity investment? $110 $10 $90 $85 $71

Explanation / Answer

Hi,

Please find the answer as follows:

Answer is Option E (71) calculated as follows:

Book Value = 50 + .35*100 - .35*40 = 71

Thanks.

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