On January 1, 2013, Tonya Ltd $\begin{array} { | l | l | } \hline \text { Investment in Chen } & \text { Investment Income } \\\hline \$ 600,000 & \$ 34,000 \\\hline\end{array}$

question 36

Multiple Choice

On January 1, 2013, Tonya Ltd. started Chen Ltd. by contributing $600,000 and received 100% of the common shares of Chen. Chen reported net income of $40,000 in 2013 and $85,000 in 2014 and paid out 40% of its net income as dividends in each year. Under the equity method, which of the following amounts should be reported on Tonya's separate-entity 2014 financial statements?

• A)
• \(\begin{array} { | l | l | }
• \hline \text { Investment in Chen } & \text { Investment Income } \\
• \hline \$ 600,000 & \$ 34,000 \\
• \hline
• \end{array}\)
• B)
• \(\begin{array} { | l | l | }
• \hline \text { Investment in Chen } & \text { Investment Income } \\
• \hline \$ 675,000 & \$ 85,000 \\
• \hline
• \end{array}\)
• C)
• \(\begin{array} { | l | l | }
• \hline \text { Investment in Chen } & \text { Investment Income } \\
• \hline \$ 625,000 & \$ 34,000 \\
• \hline
• \end{array}\)
• D)
• \(\begin{array} { | l | l | }
• \hline \text { Investment in Chen } & \text { Investment Income } \\
• \hline \$ 625,000 & \$ 40,000 \\
• \hline
• \end{array}\)

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