What the effect of the investment on the investor income

Reference no: EM132789436

Problem 1: On January 2, 2020, Investor acquired 10% of the common shares of Investee. the cost of the investment was $ 50,000. In 2020, Investee, reported net income of $ 100,000 and paid dividends of $ 20,000. As of December 31, the market value of Investor's shares of Investee was $ 57,000. The effect of this investment on the Investor's Income and Expense Statement for 2020 was:

a. Dividend income of $ 2,000

b. Dividend income of $ 2,000 and unrealized gain of $ 7,000

c. Investment income of $ 10,000

d.Investment income of $ 10,000 and unrealized gain of $ 7,000

Problem 2: On January 2, 2020, Investor acquired 30% of the common shares of Investee. the cost of the investment was $ 50,000. In 2020, Investee, reported net income of $ 100,000 and paid dividends of $ 20,000. As of December 31, the market value of Investor's shares of Investee was $ 57,000. The effect of this investment on the Investor's Income and Expense Statement for 2020 was:

a. Dividend income of $ 6,000

b. Dividend income of $ 6,000 and unrealized gain of $ 7,000

c. Investment income of $ 30,000

d. Investment income of $ 30,000 and unrealized gain of $ 7,000

Reference no: EM132789436

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