Suppose that AXE company acquires exactly 25% of the voting common stock of Company SARDAR Inc

Suppose that AXE company acquires exactly 25% of the voting common stock of Company SARDAR Inc. for $3,000,000 at the beginning of the year 2020. Pfizer company reports $1,200,000 earnings for the year in its net income and pays $550,000 in cash dividends at the end of the year 2020.

1. Using the cost method, what is the investment income and the balance sheet investment account balance respectively for AXE company? *

A) $137,500, $3,000,000

B) $300,000; $3,162,500

C) $137,500; $2,300,000

D) None of the above.

2. Using the equity method, what is the investment income and the balance sheet investment account balance respectively for AXE company? *

A) $137,500, $3,000,000

B) $300,000; $3,162,500

C) $137,500; $2,300,000

D) None of the above.