Heartfelt Company Owns a 40% Interest in the Voting Common

question 103

Multiple Choice

Heartfelt Company owns a 40% interest in the voting common stock of Candle Corporation, and Heartfelt accounts for the investment using the equity method. During 2014, 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, 2014. How much investment income should Heartfelt report during 2014 from the Candle investment?

• A) $36,000.
• B) $40,000.
• C)$4,000.
• D)$10,000.

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Definitions:

Glucose

A simple sugar that is an important energy source in living organisms and is a component of many carbohydrates.

Aerobic Respiration

A process of producing cellular energy involving oxygen. Cells break down food in the mitochondria in a long, multistep process that produces roughly 36 ATP.

Oxaloacetate

A four-carbon molecule that plays a vital role in the citric acid cycle (Krebs cycle) and gluconeogenesis, involved in energy production and glucose synthesis.

Anaerobic Pathways

Anaerobic pathways are biochemical processes that enable cells to produce energy without the need for oxygen.