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

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)
$\begin{array} { | l | l | } \hline \text { Investment in Chen } & \text { Investment Income } \\\hline \$ 625,000 & \$ 40,000 \\\hline\end{array}$

Correct Answer:

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