Problem:
On January 2, Year 1, Pool Co. acquired 75% of Kale Co.'s outstanding common stock. The balance sheet data at December 31, 20x1, show retained earnings of $200,000 per company. During 20x1, Pool and Kale paid cash dividends of $25,000 and $5,000, respectively, to their shareholders. There were no other intercompany transactions.
Required:
In its December 31, 20x1, consolidated statement of retained earnings, which amount should Pool report as dividends paid?
- $5,000
- $25,000
- $26,250
- $30,000
Note: Please provide through step by step calculations.