When an investor acquires 20% or more of the voting stock of an investee, it is presumed that, without evidence to the contrary, that an investor maintains the ability to exercise significant influence over the investee. Conversely, when an ownership position is less than 20%, there is a presumption that the investor does not exert significant influence over the investee unless it can otherwise demonstrate such ability.

When Spring Co makes the purchase, it records its investment under “Investments in Associates/Affiliates”, a long-term asset account. The transaction is recorded at cost.

Dr. Investments in Associates 600000

Cr. Cash 600000

Spring Co receives dividends of $3750, which is 30% of $12500and records a reduction in their investment account. The reason for this is that they have received money from their investee. In other words, there is an outflow of cash from the investee, as reflected in the reduced investment account.

Finally, Spring Co records the net income from Fall Inc as an increase to its Investment account.

Similarly Investment gain from discontinued operations also recorded i.e 30000

By considering all of the above option D is correct