Items 1 through 3 are based on the following data:
Lake Corporation’s accounting records showed the following investments at January 1, 2006:
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Common stock: |
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Kar Corp. (1,000 shares) |
$ 10,000 |
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Aub Corp. (5,000 shares) |
100,000 |
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Real estate: |
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Parking lot (leased to Day Co.) |
300,000 |
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Other: |
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Trademark (at cost, less accumulated amortization) |
25,000 |
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Total investments |
$435,000 |
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Lake owns 1% of Kar and 30% of Aub. Lake’s directors constitute a majority of Aub’s directors. The Day lease, which commenced on January 1, 2004, is for ten years, at an annual rental of $48,000. In addition, on January 1, 2004, Day paid a nonrefundable deposit of $50,000, as well as a security deposit of $8,000 to be refunded upon expiration of the lease. The trademark was licensed to Barr Co. for royalties of 10% of sales of the trademarked items. Royalties are payable semiannually on March 1 (for sales in July through December of the prior year), and on September 1 (for sales in January through June of the same year).
During the year ended December 31, 2006, Lake received cash dividends of $1,000 from Kar, and $15,000 from Aub, whose 2006 net incomes were $75,000 and $150,000, respectively. Lake also received $48,000 rent from Day in 2006 and the following royalties from Barr:
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March 1 |
September 1 |
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2005 |
$3,000 |
$5,000 |
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2006 |
4,000 |
7,000 |
Barr estimated that sales of the trademarked items would total $20,000 for the last half of 2006.
In Lake’s 2006 income statement, how much should be reported for dividend revenue?
- $16,000
- $ 2,400
- $ 1,000
- $ 150
In Lake’s 2006 income statement, how much should be reported for royalty revenue?
- $14,000
- $13,000
- $11,000
- $ 9,000
In Lake’s 2006 income statement, how much should be reported for rental revenue?
- $43,000
- $48,000
- $53,000
- $53,800