On January 1, 20X1, Best Décor Ltd B) C) D)

On January 1, 20X1, Best Décor Ltd. started Chic Styles Ltd. by contributing $500,000 and received 100% of the common shares of Chic Styles. Chic Styles reported net income of $50,000 in 20X1 and $75,000 in 20X2 and paid out 40% of its net income as dividends in each year. Under the equity method, what amount should be reported as Investment in Chic Styles and Investment Income on Best Décor's separate-entity 20X2 financial statements?

A) $$\begin{array} { | l | l | } \hline \text { Investment in Chic Styles } & \text { Investment Income } \\\hline \$500,000 & \$ 30,000 \\\hline\end{array}$$
B)
$$\begin{array} { | l | l | } \hline \text { Investment in Chic Styles } & \text { Investment Income } \\\hline \$ 575,000 & \$ 75,000 \\\hline\end{array}$$
C) $$\begin{array} { | l | l | } \hline \text { Investment in Chic Styles } & \text { Investment Income } \\\hline 625,000 & \$ 30,000 \\\hline\end{array}$$
D) $$\begin{array} { | l | l | } \hline \text { Investment in Chic Styles } & \text { Investment Income } \\\hline \$ 625,000 & \$ 75,000 \\\hline\end{array}$$

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