Question: 18. On July 1, 2010, Diamond, Inc. paid $1,000,000 for 100,000 shares (40%) of the outstanding common stock of Ashley Corporation. At that date the

18. On July 1, 2010, Diamond, Inc. paid $1,000,000 for 100,000 shares (40%) of the outstanding common stock of Ashley Corporation. At that date the net assets of Ashley totaled $2,500,000 and the fair values of all of Ashley’s identifiable assets and liabilities were equal to their book values. Ashley reported net income of $500,000 for the year ended December 31, 2010, of which $300,000 was for the six months ended December 31, 2010. Ashley paid cash dividends of $250,000 on September 30, 2010. Diamond does not elect the fair value option for reporting its investment in Ashley. In its income statement for the year ended December 31, 2010, what amount of income should Diamond report from its investments in Ashley?

a. $ 80,000

b. $100,000

c. $120,000

d. $200,000

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