On January 1, 20X4, Palmer, Inc

question 10

Multiple Choice

On January 1, 20X4, Palmer, Inc. bought 40% of the outstanding shares of Arnold Corporation at a cost of $137,000. The equity method of accounting for this investment is used. During 20X4, Arnold Corporation reported $30,000 of net earnings and paid $10,000 in cash dividends. At the end of 20X4, the shares had a market value of $150,000. How much income will Palmer report from the Arnold investment during 20X4?

• A) $12,000
• B) $30,000
• C) $10,000
• D) $4,000

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Definitions:

Production

The process of creating goods and services from various resources.

TPS

A Transaction Processing System is an information system that gathers, saves, alters, and provides access to an organization's transaction data.

Make-to-order

A production strategy where manufacturing starts only after a customer's order is received, allowing for customization of products but potentially leading to longer lead times.

Make-to-stock

A production strategy where items are manufactured for stock based on demand forecasts, rather than being custom made to order.