Heartfelt Company owns a 40% interest in the voting common stock of Candle Corporation, accounted for using the equity method. During 20X4, Candle Corporation reported net earnings 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, 20X4.
- At what amount is the Candle investment reported on the December 31, 20X4 statement of financial position?
A) $500,000.
B) $540,000.
C) $496,000.
D) $536,000.

Question

Quizplus · Accepted Answer

Calculation: Candle investment ($536,000) = January 1, 20X4 carrying value ($500,000) + Investment income [Investee net income ($100,000) × Ownership percentage (40%)] - Proportionate share of investee dividends ($10,000 × 40%).

Heartfelt Company Owns a 40% Interest in the Voting Common