Question: PLEASE EXPLAIN THE ANSWER STEP BY STEP. THANK U. E2-4 Calculate income for a midyear investment Sultan Corporation pays $500,000 for a 20 percent interest

PLEASE EXPLAIN THE ANSWER STEP BY STEP. THANK U.

E2-4 Calculate income for a midyear investment Sultan Corporation pays $500,000 for a 20 percent interest in Chula Corporation on July 1, 2016, when Chulas capital stock is valued at $700,000, its retained earnings at $500,000, and the book value of Chulas net assets equals fair value. Additional information about Chula Corporation is given below: a. It paid dividends of $25,000 on March 1, 2016, and $25,000 on September 1, 2016. b. Its net income in 2016 was $150,000 (evenly throughout the year).

1. Calculate Sultans income from the investment if the fair value/cost method is applied. 2. Calculate Sultans income from the investment if the equity method is applied.

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