johnson, an investor in acme co., asked smith, cpa for advice on the propriety of acme's financialreporting for two of its investments. smith obtained the following information related to the investmentsfrom acme's december 31, year 7, financial statements:20% ownership interest in kern co., represented by 200,000 shares of outstanding common stockpurchased on january 2, year 7, for $600,000.acquired debt securities from wand co., on january 2, year 7, for $300,000 with the intent to hold themfor a short period of time.on january 2, year 7, the carrying values of the acquired investments equaled their purchase price.kern reported earnings of $400,000 for the year ended december 31, year 7, and declared and paiddividends of $100,000 during year 7.acme received $52,000 in interest payments from wand co. during the year.