Garrett Manufacturing owns 10% of the common stock of Timberline Corporation and used the fair-value method to account for this investment. Timberline reported a net income of $110,000 for 20X2 and paid dividends of $50,000 on October 1, 20X2. How much income should Garrett recognize on this investment in 20X2? $50,000 $16,500 $25,500 $7,500 $5,000

How should a permanent loss in value of an investment using the equity method be treated? The investor's stockholders' equity is reduced. A loss is reported the same as a loss in value of other long-term assets. The equity in investee income is reduced. An extraordinary loss would be reported. No adjustment is necessary.