Reference no: EM132823347

On January 1, 2017, Marian Co. acquired as a long term investment for $7,000,000 a 40% interest in an investee when the fair value of the net assets was $17,500,000. The investee has reported the following net losses:

2017 - 5,000,000
2018 - 7,000,000
2019 - 8,000,000
2020 - 4,000,000

Problem 1: On January 1, 2019, Marian Co. made cash advances of $2,000,000 to the investee. On December 31, 2020, it is not expected that Marian Co. will provide further financial support for the investee. Assuming in 2021, the investee earned a net income of $3,000,000, what amount must be recognized by Marian Co. as its share in the 2021 net income of the investee?