You answered the Ace of Hearts. This is correct. You think that Declarer is either out of Hearts or has the King left. If he has the King and you play the Queen, you will lose the trick. If he is out of Hearts, you will lose the trick no matter what you play. Normally the tradition is to play low as second hand, which is what East is in the instance. However, there is another saying - which is "COVER AN HONOUR WITH AN HONOUR". In Bridge, the HONOURS are the top 5 cards in a Suit - Ace, King, Queen, Jack and Ten. So if your opponent starts out with a high card, it is good for you to play a higher card.
However, despite your thinking the situation through, Declarer is indeed void in Hearts, and will trump the trick with the 3 of Clubs. West will follow through by playing the 2 of Hearts.
Declarer can repeat the same sort of strategy as he used before. This time playing the 10 of Diamonds, which West cannot follow, so he discards a useless card, the 4 of Hearts. Dummy trumps the trick with the 9 of Clubs, and East plays his 7 of Diamonds.
Now the trick is with Dummy so again he will play a Heart - the 7 this time. Now there is no question about what will happen, so East will play the 5. Declarer will trump with the 5 of Clubs, and West plays the 6 of Hearts.
Now Declarer has 2 Clubs left, and they are both winners as nobody else has any. And he has won 12 tricks - more than the contract required. The bid was 5 Hearts, which means 11 tricks, and Declarer has taken an extra trick, which his called an OVERTRICK.
When I talked about scoring earlier, I mentioned that a GAME was 100 points, and that Clubs were worth 20 points per trick made above the 6 required ones, according to the contract. So on this occasion, North and South have scored 120 points - 100 for the 5 Clubs that they bid - and that is a game, and 20 points for the overtrick which counts as a bonus. We will talk more about scoring in a later lesson. Go now to Lesson 3.