Jeff Company purchased common stock in Gonzalez Company.Jeff Company treats the investment as available-for-sale securities.During the current year,Gonzalez Company earned $4,000,000 and paid dividends of $1,000,000.Assume that Jeff Company owns 10% of the outstanding shares of Gonzalez Company.Gonzalez Company's dividend will affect Jeff Company by ________.
A)increasing cash and investments by $100,000
B)increasing investments and stockholders' equity by $100,000
C)increasing cash and stockholders' equity by $100,000
D)increasing cash and decreasing investments by $100,000

Question

Quizplus · Accepted Answer

Jeff Company will receive 10% of the dividends paid by Gonzalez Company, which amounts to $100,000. This will increase Jeff Company's cash and stockholders' equity by $100,000.

Jeff Company Purchased Common Stock in Gonzalez Company