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How much should be recorded as investment income

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Question - Faye Co. owned 20% of Pen Inc.'s preference share capital and 50% of the ordinary share capital. Pen Inc.'s share capital outstanding comprised the following at year-end:

10% cumulative preference share capital - 2,000,000

Ordinary share capital - 7,000,000

Pen Inc. reported net income of $5,000,000 for the current year.

Required -

a. What amount is the balance of Investment in Pen Inc. at the end of the current year?

b. Assuming that the preference share capital of Pen Inc. are non-cumulative, how much should be recorded as investment income for the current year?

Reference no: EM132881195

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