Items 1 through 3 are based on the following:

Grant, Inc. acquired 30% of South Co.’s voting stock for $200,000 on January 2, 2005. Grant’s 30% interest in South gave Grant the ability to exercise significant influence over South’s operating and financial policies. During 2005, South earned $80,000 and paid dividends of $50,000. South reported earnings of $100,000 for the six months ended June 30, 2006, and $200,000 for the year ended December 31, 2006. On July 1, 2006, Grant sold half of its stock in South for $150,000 cash. South paid dividends of $60,000 on October 1, 2006.

Before income taxes, what amount should Grant include in its 2005 income statement as a result of the investment?

  1. $15,000
  2. $24,000
  3. $50,000
  4. $80,000

In Grant’s December 31, 2005 balance sheet, what should be the carrying amount of this investment?

  1. $200,000
  2. $209,000
  3. $224,000
  4. $230,000

In its 2006 income statement, what amount should Grant report as gain from the sale of half of its investment?

  1. $24,500
  2. $30,500
  3. $35,000
  4. $45,500