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On January 1, 2020, Mehan, Incorporated purchased 15,000 shares of Cook Company for $150,000 giving Mehan a 15% ownership of Cook. The fair value of the 15% investment was the same as the carrying value of the investment when, on January 1, 2021, Mehan purchased an additional 25.000 shares (25%) of Cook for $300,000. This last purchase gave Mehan the ability to apply significant influence over Cook. The book value of Cook on January 1, 2020 was $1,000,000. The book value of Cook on January 1, 2021, was $1,100,000. Any excess of cost over book value for this second transaction is assigned to a database and amortized over four years. Cook reports net income and dividends as follows. These amounts are assumed to have occurred evenly throughout the years: Net Income 2020 $200,000 2021 225,000 2022 250,000 Dividends $50,000 50,000 60,000 On April 1, 2022, just after its first dividend receipt, Mehan sells 10,000 shares of its investment. How much income did Mehan report from Cook during 2021?

On January 1, 2020, Mehan, Incorporated purchased 15,000 shares of Cook Company for $150,000 giving Mehan a 15% ownership of Cook. The fair value of the 15% investment was the same as the carrying value of the investment when, on January 1, 2021, Mehan purchased an additional 25.000 shares (25%) of Cook for $300,000. This last purchase gave Mehan the ability to apply significant influence over Cook. The book value of Cook on January 1, 2020 was $1,000,000. The book value of Cook on January 1, 2021, was $1,100,000. Any excess of cost over book value for this second transaction is assigned to a database and amortized over four years. Cook reports net income and dividends as follows. These amounts are assumed to have occurred evenly throughout the years: Net Income 2020 $200,000 2021 225,000 2022 250,000 Dividends $50,000 50,000 60,000 On April 1, 2022, just after its first dividend receipt, Mehan sells 10,000 shares of its investment. How much income did Mehan report from Cook during 2021?

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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How much income did Mehan report from Cook during 2021? Multiple Choice O O $87.500. $110,000 $90,000 $67,500. $78,750.
Transcribed Image Text:How much income did Mehan report from Cook during 2021? Multiple Choice O O $87.500. $110,000 $90,000 $67,500. $78,750.
On January 1, 2020, Mehan, Incorporated purchased 15,000 shares of Cook Company for $150,000 giving Mehan a 15% ownership of Cook. The fair value of the 15% investment was the same as the carrying value of the investment when, on January 1, 2021, Mehan purchased an additional 25.000 shares (25%) of Cook for $300,000. This last purchase gave Mehan the ability to apply significant influence over Cook. The book value of Cook on January 1, 2020 was $1,000,000. The book value of Cook on January 1, 2021, was $1,100,000. Any excess of cost over book value for this second transaction is assigned to a database and amortized over four years. Cook reports net income and dividends as follows. These amounts are assumed to have occurred evenly throughout the years: Net Income 2020 $200,000 2021 225,000 2022 250,000 On April 1, 2022, just after its first dividend receipt, Mehan sells 10,000 shares of its investment. How much income did Mehan report from Cook during 2021? Multiple Choice O $87,500. Dividends $50,000 50,000 60,000 $110,000.
Transcribed Image Text:On January 1, 2020, Mehan, Incorporated purchased 15,000 shares of Cook Company for $150,000 giving Mehan a 15% ownership of Cook. The fair value of the 15% investment was the same as the carrying value of the investment when, on January 1, 2021, Mehan purchased an additional 25.000 shares (25%) of Cook for $300,000. This last purchase gave Mehan the ability to apply significant influence over Cook. The book value of Cook on January 1, 2020 was $1,000,000. The book value of Cook on January 1, 2021, was $1,100,000. Any excess of cost over book value for this second transaction is assigned to a database and amortized over four years. Cook reports net income and dividends as follows. These amounts are assumed to have occurred evenly throughout the years: Net Income 2020 $200,000 2021 225,000 2022 250,000 On April 1, 2022, just after its first dividend receipt, Mehan sells 10,000 shares of its investment. How much income did Mehan report from Cook during 2021? Multiple Choice O $87,500. Dividends $50,000 50,000 60,000 $110,000.
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