Business, 23.04.2020 17:38 trinityhayes347

On January 1, 2017, Mehan, Incorporated purchased 15,000 shares of Cook Company for $150,000 giving Mehan a 15% ownership of Cook. The fair value of the 15% investment was the same as the carrying value of the investment when , on January 1, 2018, Mehan purchased an additional 25,000 shares (25%) of Cook for $300,000. This last purchase gave Mehan the ability to apply significant influence over Cook. The book value of Cook on January 1, 2017 was $1,000,000. The book value of Cook on January 1, 2018, was $1,100,000. Any excess of cost over book value for this second transaction is assigned to a database and amortized over four years.

Cook reports net income and dividends as follows. These amounts are assumed to have occurred evenly throughout the years:

Net Income Dividends

2017 $ 200,000 $ 50,000
2018 225,000 50,000
2019 250,000 60,000

On April 1, 2019, just after its first dividend receipt, Mehan sells 10,000 shares of its investment.
How much income did Mehan report from Cook during 2017?
$0.

a. $7,500.
b. $50,000.
c. $30,000.
d. $22,500.

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On January 1, 2017, Mehan, Incorporated purchased 15,000 shares of Cook Company for $150,000 giving...

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