On January 1, 2014, Palmer, Inc

Multiple Choice

On January 1, 2014, Palmer, Inc. bought 40% of the outstanding shares of Arnold Corporation at a cost of $137,000. Palmer uses the equity method of accounting for this investment is used. During 2014, Arnold Corporation reported $30,000 of net income and paid a total of $10,000 in cash dividends. At the end of 2014, the shares had a fair value of $150,000. What is the amount of Equity in Affiliate Earnings for 2014?

A) $4,000.
B) $12,000.
C) $13,000.
D) $21,000.