REFERENCE: Ref.01_07
On January 1,2007,Mehan,Incorporated purchased 15,000 shares of Cook Company for $150,000 giving Mehan a 15% ownership of Cook.On January 1,2008 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 1,2007,was $1,000,000.The book value of Cook on January 1,2008,was $1,150,000.Any excess of cost over book value for this second transaction is assigned to a database and amortized over five years.
Cook reports net income and dividends as follows.These amounts are assumed to have occurred evenly throughout the years:
On ,April 1,2009,just after its first dividend receipt,Mehan sells 10,000 shares of its investment.
-How much income did Mehan report from Cook during 2007?

Question

REFERENCE: Ref.01_07
On January 1,2007,Mehan,Incorporated purchased 15,000 shares of Cook Company for $150,000 giving Mehan a 15% ownership of Cook.On January 1,2008 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 1,2007,was $1,000,000.The book value of Cook on January 1,2008,was $1,150,000.Any excess of cost over book value for this second transaction is assigned to a database and amortized over five years.
Cook reports net income and dividends as follows.These amounts are assumed to have occurred evenly throughout the years:
  On ,April 1,2009,just after its first dividend receipt,Mehan sells 10,000 shares of its investment.
-How much income did Mehan report from Cook during 2007?

Quizplus · Accepted Answer

Mehan reported $7,500 from Cook in 2007, which is the correct amount based on the given options.

REFERENCE: Ref.01_07 on January 1,2007,Mehan,Incorporated Purchased 15,000 Shares of Cook Company for Company