[WM]

Hey Guys, Thank you for helping me with this FAR task. I’m so confused about the standard solutions and hope some of you guys might know what is going on. It’s gonna be a long SIM and I am trying to put it short and simple.

During Year 1, Ember Corp. purchases 30,000 shares, 15 percent of Stanton Industries at $31 per share and pays legal fees of $35,000 for the acquisition. The investment in Stanton is classified as an equity security, as Ember does not exercise significant influence. The year-end stock price of Stanton Industries is $35 per share.
As at the year ending December 31, Year 1, Stanton Industries has declared a dividend of $2.15 per share for shareholders registered at the close of business on December 1, Year 1. The dividend will be paid on December 20, Year 1.
Solutions:
Q1. Ember Corp.’s initial (acquisition) cost: 30,000 shares × $31 per share = $930,000 + Legal costs of $35,000 = $965,000.
Q2. Dividends paid to Ember are 30,000 shares × $2.15 per share = $64,500. Any dividends paid in excess of retained earnings are treated as a return of capital. Retained earnings of $395,000 × 15% = $59,250 “attributable” to Ember. The excess is treated as a reduction in the Investment in Stanton account.
Q3. The year-end gain or loss from changes in value of Stanton Industries’s stock is 30,000 shares × ($35 per share year- $31 per share)= $120,000.

My question about this SIM:
Question1– about the initial investment cost:
I was confused that why transaction cost(like legal or consultant fees) for FVTNI (investment in equity securities)should be capitalized?? As I remembered, transaction cost related to HTM and AFS will be capitalized and recognized as part of investment principals. Transaction cost related to M&A and Trading investments will otherwise be expensed.
Question2–about the year-end gain or loss from changes in value of Stanton Industries’s stock:
Why is that?? I thought it be 35*30,000-965,000=85,000…. since the CV/BV of this investment is $959,750 = $965.000 initial investment – $5,250 reduction in the Investment in Stanton account due to liquidating dividends , not 31*30,000.

Does anyone know which part I did wrong? I will be so appreciated if someone can help me out with this question that tangled me craaaazy…