how should deed report the receipt and distribution of the merchandise in its income 605465

Items 1 and 2 are based on the following:

Deed Co. owns 2% of Beck Cosmetic Retailers. A property dividend by Beck consisted of merchandise with a fair value lower than the listed retail price. Deed in turn gave the merchandise to its employees as a holiday bonus.

How should Deed report the receipt and distribution of the merchandise in its income statement?

1. At fair value for both dividend revenue and employee compensation expense.
2. At listed retail price for both dividend revenue and employee compensation expense.
3. At fair value for dividend revenue and listed retail price for employee compensation expense.
4. By disclosure only.

How should Deed report the receipt and distribution of the merchandise in its statement of cash flows?

1. As both an inflow and outflow for operating activities.
2. As both an inflow and outflow for investing activities.
3. As an inflow for investing activities and outflow for operating activities.
4. As a noncash activity.