On January 1, 2020, Large Company acquired 30% of Small Company at a cost of $280,000. Small’s net assets had a book value of $350,000 at the date of acquisition. At this date, all book values were equal to fair market values, except for equipment, whose fair market value exceeded net book value by $25,000. Equipment is amortized over 5 years from the date of acquisition. The FMV of Large’s investment in Small was $255,000 at December 31, 2020 and $265,000 at December 31, 2021.
Small reported net income and paid dividends at the end of each year as follows:
2020 2021
Net income $30,000 $18,000
Dividends declared/paid 20,000 15,000
What is the total investment income from Small Company that Large Company will report on its 2020 financial statements?
|
30,000 |
|
|
9,000 |
|
|
4,000 |
|
|
7,500 |
|
|
1,500 |
