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

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?

A) $30,000.
B) $22,500.
C) $7,500.
D) $0.
E) $50,000.

Correct Answer:

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