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GNR Inc owns 100% of NMX Inc.During the year,NMX Inc earned a net income of $40,000 and paid Dividends of $10,000.
-Assuming once again that GNR owned 80% of NMX instead of 100%,what would be the effect on GNR's investment in NMX account under the Cost Method?
A)An increase of $30,000.
B)An increase of $40,000.
C)An increase of $24,000.
D)No effect.

Question

The following information pertains to questions 
GNR Inc owns 100% of NMX Inc.During the year,NMX Inc earned a net income of $40,000 and paid Dividends of $10,000.
-Assuming once again that GNR owned 80% of NMX instead of 100%,what would be the effect on GNR's investment in NMX account under the Cost Method?
A)An increase of $30,000.
B)An increase of $40,000.
C)An increase of $24,000.
D)No effect.

Quizplus · Accepted Answer

Under the Cost Method, changes in the subsidiary's net income or dividends do not affect the parent's investment account. The investment remains at the cost paid for the shares.

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