Jones, Incorporated acquires 15% of Anderson Corporation on January 1, 2020, for $105,000 when the book value of Anderson was $600,000. During 2020 Anderson reported net income of $150,000 and paid dividends of $50,000. On January 1, 2021, Jones purchased an additional 25% of Anderson for $200,000. Any excess cost over book value is attributable to goodwill with an indefinite life. The fair-value method was used during 2020 but Jones has deemed it necessary to change to the equity method after the second purchase. During 2021 Anderson reported net income of $200,000, and reported dividends of $75,000.The income reported by Jones for 2020 with regard to the Anderson investment is

Question

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Under the fair-value method, Jones would recognize dividend income from Anderson. For 2020, Jones would recognize 15% of the dividends paid by Anderson, which is 15% of $50,000, equaling $7,500.

Jones, Incorporated Acquires 15% of Anderson Corporation on January 1