On January 1, 20X4, Palmer, Inc

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