Question: Please help solving this question, and please explain why in detail. Thank you! Investor Inc. owns 40 percent of Alimand Corporation. During the calendar year

Please help solving this question, and please explain why in detail. Thank you!

Investor Inc. owns 40 percent of Alimand Corporation. During the calendar year 20X5, Alimand had net earnings of $100,000 and paid dividends of $10,000. During 20X5, the market value of Alimand's stock remained unchanged. Investor mistakenly recorded these transactions by carrying the investment at fair value rather thanusing the equity method of accounting. What effect would this have on the investment account, net earnings, and retained earnings, respectively?

Multiple Choice

Overstate, overstate, overstate.
Understate, understate, understate.
Understate, overstate, overstate.
Overstate, understate, understate.

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