Gaw Company owns 15% of the common stock of Trace Corporation and used the fair-value method to account for this investment. Trace reported net income of $110,000 for 2018 and paid dividends of $60,000 on October 1, 2018. How much income should Gaw recognize on this investment in 2018?

500. A) $16,500.
501. B) $9,000.
502. C) $25,500.
503. D) $7,500.
504. E) $50,000.

Answer: B

Learning Objective: 01-01

Topic: Investments―Fair-value method

Difficulty: 1 Easy

Blooms: Apply

AACSB: Knowledge Application

AICPA: BB Critical Thinking

AICPA: FN Measurement

Feedback: $60,000 × .15 = $9,000