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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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