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Investment for change in fair value by crediting unrealized

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On January 1, 2017, Joe Corporation purchases 35% of outstanding stock of Delight Corporation for $370,000 and accounts for the investment using the equity method. The shares of Delight were worth $450,000 on July 1, 2017. Delight reported a net income of $260,000 for the year 2017 and distributed a total cash dividend of $35,000 to its stockholders. At the end of the year Joe sold its investment in Delight for $500,000. Which of the following statements is true?

Joe will increase the Investment in Delight accounts by $260,000 for recognizing the income of Delight.

Joe will reduce the Investment in Delight account by $12,250 for dividends received.

Joe will record a gain on sales by comparing the original cost of the investment and the selling price.

Joe will adjust the investment for change in its fair value by crediting Unrealized Gain in Delight Investment.

Joe will show its Investment in Delight account balance at its fair value of $450,000 on July 1, 2017.

Reference no: EM133272695

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