Heartfelt Company owns a 40% interest in the voting common stock of Candle Corporation,accounted for using the equity method.During 2010,Candle Corporation reported net income of $100,000 and declared and paid cash dividends of $10,000.The carrying value of the Candle investment was $500,000 on January 1,2010.At what amount is the Candle investment reported on the December 31,2010 balance sheet?
A)$500,000.
B)$540,000.
C)$496,000.
D)$536,000.

Question

Quizplus · Accepted Answer

Candle investment ($536,000) = January 1, 2010 carrying value ($500,000) + Investment income [Investee net income ($100,000) F1F1F1S1F1F1F10 Ownership percentage (40%)] - Proportionate share of investee dividends ($10,000 F1F1F1S1F1F1F10 40%)

Heartfelt Company Owns a 40% Interest in the Voting Common