On February 15,Jewel Company buys 7,000 shares of Marcelo Corp.at $28.53 per share.The stock is classified as a stock investment with insignificant influence.This is the company's first and only stock investment.On March 15,Marcelo Corp.declares a dividend of $1.15 per share payable to stockholders of record on April 15.Jewel Company received the dividend on April 15 and ultimately sells half of the Marcelo Corp.stock on November 17 of the current year for $29.30 per share.
-The fair value of the remaining shares is $29.50 per share.The impact on Jewel's net income as a result of its investment in Marcelo Corp.was a(n):

Question

Quizplus · Accepted Answer

The correct answer is A because the net income increased by $14,140 as a result of the investment in Marcelo Corp. This is calculated as follows:Dividend income: 7,000 shares x $1.15 per share = $8,050Gain on sale of stock: (7,000 shares / 2) x ($29.30 - $28.53) = $5,440Fair value adjustment: (7,000 shares / 2) x ($29.50 - $29.30) = $650Total impact on net income: $8,050 + $5,440 + $650 = $14,140

On February 15,Jewel Company Buys 7,000 Shares of Marcelo Corp