On January 1, 2001, MNO purchased 30 percent of the 10,000 shares of the outstanding common shares, of RST for $60,000 cash (and properly computed goodwill of $5,000 amortizable over 10 years). On December 31, 2001, RST reported net income of $40,000 and declared a cash dividend of $2 per share. Select the appropriate combination below for the December 31, 2001, account balances to be reported by MNO. $\begin{array}{|r|r|r|}
\hline& \text { balance sheet -dec-31,2001 } & \text { income statment-2001 } \
\hline& \text { Investment Account } & \text { Investment Revenue } \
\hline 1&\$ 60,000 & \$ 6,000 \
\hline 2&\$ 65.500 & \$ 5,500 \
\hline 3&\$ 65.500 & \$ 11,500 \
\hline 4&\$ 65.500 & \$ 12,000 \
\hline
\end{array}$

Question

Quizplus · Accepted Answer

The investment account balance is $60,000 + ($40,000 x 30%) - ($2 x 3,000) = $65,500. The investment revenue is $40,000 x 30% = $12,000.

On January 1, 2001, MNO Purchased 30 Percent of the 10,000