Grant, Inc. acquired 30% of South Co.’s voting stock for
$200,000 on January 2, year 1. Grant’s 30% interest in South
gave Grant the ability to exercise significant influence over
South’s operating and financial policies. During year 1, South
earned $80,000 and paid dividends of $50,000. South reported
earnings of $100,000 for the six months ended June 30, year 2,
and $200,000 for the year ended December 31, year 2. On July 1,
year 2, Grant sold half of its stock in South for $150,000 cash.
South paid dividends of $60,000 on October 1, year 2. Grant
does not elect the fair value option to report this investment.
Before income taxes, what amount should Grant include in
its year 1 income statement as a result of the investment?