Question
Lee, Inc. acquired 30% of Polk Corp.'s voting stock on January 1, 2016 for $100,000. During 2016, Polk earned $40,000 and paid dividends of $25,000.
Lee, Inc. acquired 30% of Polk Corp.'s voting stock on January 1, 2016 for $100,000. During 2016, Polk earned $40,000 and paid dividends of $25,000.
Lee's 30% interest in Polk gives Lee the ability to exercise significant influence over Polk's operating and financial policies. During 2017, Polk earned $50,000 and paid dividends of $15,000 on April 1 and $15,000 on October 1.
On July 1, 2017, Lee sold half of its stock in Polk for $66,000 cash.
Before income taxes, what amount should Lee include in its 2016 Income Statement as a result of the investment?
$12,000
$40,000
$7,500
$25,000
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