4102-financial Accounting

At the beginning of 2003, Red Corporation purchased a long-term
investment in Acme Corporation. The following information is available
for the purchases:

% interest acquired 30%

# of shares purchased 300,000

Price/share $15.00

Amount paid $4,500,000



The following information is available for Acme for the years 2003-2007:

Year

Income

Dividends Share FMV

at End of Year

2003 $ 2,400,000 $1,500,000 $17.00

2004 $ 2,600,000 $1,600,000 $19.00

2005 $ 2,900,000 $1,800,000 $21.00

2006 $ 3,200,000 $2,000,000 $24.00

2007 $ 3,500,000 $2,200,000 $27.00

Totals $14,600,000 $9,100,000



On January 1, 2008, Red sold its investment in Acme for $27 per share.

Required:

a. How much income would Red report in the aggregate for the years
2003-2007? It is not necessary to show the income year by year.

b. How much income would Red report for 2008?

c. What was Red's net income from its investment in Acme over the whole
life of the investment, from the purchase to the sale?

d. What was Red's net cash flow from its investment in Acme over the
whole life of the investment, from the purchase to the sale?