Reference no: EM132516639

Question - Nautilus Co. acquired 100% of XYZ Corp. on 1/1/X1 for $1 million when XYZ had $500,000 capital stock and $500,000 of Retained Earnings. In year X1, XYZ reported a Net Income of $500,000 and paid $100,000 of dividends. During year X1, XYZ sold goods to Nautilus Corp for $700,000 that cost XYZ $500,000. Nautilus Corp still owned 40% of the goods at the end of the year. How much investment income should Nautilus recognize from its XYZ Investment in year X1?

This problem is a continuation of the preceding problem. Recall that XYZ sold goods to Nautilus Corp for $700,000 in year X1 that cost XYZ $500,000. Nautilus Corp still owned 40% of the goods at the end of the year.

We now extend the problem to year X2. Assume that XYZ reported a Net Income of $600,000 in year X2 and again paid $100,000 of dividends. During year X2, XYZ sold more goods to Nautilus Corp for $400,000 that cost XYZ $300,000. Nautilus Corp owned 60% of the goods on 12/31/X2. How much investment income should Nautilus recognize from its XYZ Investment in year X2?