An investor company acquired 20% of an investee companys voting common stock. The investees common stock has a readily determinable fair value. The investor has representation on the investees board of directors, participates in the investees policy making process and has material business transactions with the investee. Which of the following alternatives best describes the investors required accounting for its interest in the investee?

Select one:

a. The investor should recognize as income the dividends it receives from the investee.

b. Because the investees stock has a readily determinable fair value, the investor must use fair value method to account for its interest in the investees common stock.

c. The investee should recognize as income a proportionate share of the net income recognized by the investee.

d. The investor must use the cost-based approach to account for its interest in the investees common stock.