REFERENCE: Ref.01_08 on January 4,2007,Harley,Inc.acquired 40% of the Outstanding Common Stock of Stock

REFERENCE: Ref.01_08
On January 4,2007,Harley,Inc.acquired 40% of the outstanding common stock of Bike Co.for $2,400,000.This investment gave Harley the ability to exercise significant influence over Bike.Bike's assets on that date were recorded at $10,500,000 with liabilities of $4,500,000.There were no other differences between book and fair values.
During 2007,Bike reported net income of $500,000.For 2008,Bike reported net income of $800,000.Dividends of $300,000 were paid in each of these two years.
-How much income did Harley report from Bike for 2007?

A) $120,000.
B) $200,000.
C) $300,000.
D) $320,000.
E) $500,000.

Correct Answer:

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