Use the Following Information to Answer Questions 26 and 27

question 16

Multiple Choice

Use the following information to answer questions 26 and 27
On January 1, 2014, Puma Corporation acquired 30 percent of Slume Company's stock for $150,000.On the acquisition date, Slume reported net assets of $450,000 valued at historical cost and $500,000 stated at fair value.The difference was due to the increased value of buildings with a remaining life of 10 years.During 2014 Slume reported net income of $25,000 and paid dividends of $10,000.Puma uses the equity method.
-What amount of investment income will be reported by Puma for the year 2014?

• A)$7,500
• B)$6,000
• C)$4,500
• D)$25,000

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Definitions:

Operating Activities

Encompasses the primary revenue-generating activities of an entity, including production, sales, and delivery of the company's products and services.

Cash Dividend

A distribution of profits by a company to its shareholders in the form of cash.

Comparative Balance Sheet

A financial statement that displays the company's financial position at different periods of time side by side for comparison.

Direct Method

A method of reporting cash flows from operating activities by showing major classes of gross cash receipts and payments.