Assume that reed company purchases 18,000 common shares of aiello company for $8 cash per share. during the year, reed receives a cash dividend of $0.90 per common share from aiello, and the year-end market price of aiello common stock is $9 per share. reed company classified the investment as trading securities.
how much income does reed report relating to this investment for the year?
select one:
a. $18,000
b. $145,800
c. $144,000
d. $34,200

option d is right

income does Reed report relating to this investment for the year is $34200

Explanation:

Given data

purchases shares = 18000

1 share value = $8

cash dividend = $.090 per common share

common stock = $9 per share

to find out

total income

solution

we know total income for year = total dividend + unrealized gain by the change of fair      1

we say here

total dividend received is  purchases shares  × cash dividend

total dividend = 18000  × 0.90

total dividend is $16200   2

and

Unrealized gain by change of fair  = (common stock per share  - 1 share value  )  × purchases shares

Unrealized gain by change of fair  = (9 - 8 ) 18,000

Unrealized gain by change of fair  is  $18,000       3

put equation 2 and 3 in equation 1 we get

total income for year = total dividend + unrealized gain by the change of fair

total income for year = 16200 + 18,000

income does Reed report relating to this investment for the year is $34200

option d is right

answer; ///retained

c.

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