Lu Lu Company purchased 2,000 of the 10,000 outstanding shares of Judd, Inc.'s common stock for $60,000 on January 1, 2010. During 2020, Judd declared a dividend of $5 per share and reported net income of $75,000. At the end of 2020 the market value of a share of Judd, Inc. stock has increased to $32 per share.

1. If Lu Lu Company accounts for the investment as a minority, passive investment and classifies it as an available-for-sale security, then the investment will appear in the December 31, 2020 balance sheet at what amount?

B. If Lu Lu Company accounts for the investment as a minority, active investment and uses the equity method to account for the investment, then the investment will appear in the December 31, 2020 balance sheet at what amount?

C. If Lu Lu Company accounts for the investment as a minority, active investment and uses the equity method to account for the investment, then Lu Lu will recognize what amount of 2020 income from the investment?

D. If Lu Lu Company accounts for the investment as a minority, passive and classifies the investment as an available-for-sale investment, then Lu Lu will recognize what amount of 2020 income from the investment?

Answer rating: 100% (QA)

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