On January 1, 20X8, Pullman Company acquired 30 percent of Skate Company's common stock, at underlying book value of $100,000. Skate has 100,000 shares of $2 par value, 5 percent cumulative preferred stock outstanding. No dividends are in arrears. Skate reported net income of $150,000 for 20X8 and paid total dividends of $72,000. Pullman uses the equity method to account for this investment.Based on the preceding information, what amount of investment income will Pullman Company report from its investment in Skate for the year?
A. $45,000
B. $35,000
C. $62,000
D. $42,000
Answer: D
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