On January 1, 2006, Point, Inc. purchased 10% of Iona Co.’s common stock. Point purchased additional shares bringing its ownership up to 40% of Iona’s common stock outstanding on August 1, 2006. During October 2006, Iona declared and paid a cash dividend on all of its outstanding common stock. How much income from the Iona investment should Point’s 2006 income statement report?

  1. 10% of Iona’s income for January 1 to July 31, 2006, plus 40% of Iona’s income for August 1 to December 31, 2006.
  2. 40% of Iona’s income for August 1 to December 31, 2006 only.
  3. 40% of Iona’s 2006 income.
  4. Amount equal to dividends received from Iona.