Investor Incorporation owns $40$ percent of Alimand Corporation. During the calendar year $20$X$5,$ Alimand had net earnings of $$100,000$ and paid

dividends of $$10,000.$ During $205,$ the market value of Alimand's stock remained unchanged. Investor mistakenly recorded these transactions by

carrying the investment at fair value rather than using the equity method of accounting. What effect would this have on the investment account, net

earnings, and retained earnings, respectively?

Multiple Choice

Overstate, overstate, overstate.

Overstate, understate, understate.

Understate, understate, understate.

Understate, overstate, overstate.